Democracies only: When do IMF agreements serve as a seal of approval?

Conditional lending by the IMF is predicated, in part, on the belief that IMF programs are associated with increased capital inflows to participating countries. This belief is generally consistent with theoretical arguments in the academic literature (e.g., Bird and Rowlands 1997; Bordo et al. 2004) but the empirical literature often finds otherwise (e.g., Jensen 2004). This paper argues that the effect of IMF agreements on a country’s access to foreign direct investment (FDI) depends on its domestic institutions. Access to FDI depends on a country’s ability to credibly commit to implementation, and this ability varies systematically across regime type. The theory is empirically tested using a treatment effects model with a Markov transition in the treatment equation in a dataset covering 142 countries from 1976 to 2006. We find that in democracies IMF program participation has a strong positive effect on FDI inflows and in autocracies participation has a weak negative effect.     

The effects of IMF programs on U.S. foreign direct investment in the developing world

Given the popular wisdom that the U.S. government influences IMF policies and tends to support the business community, it might be expected that IMF programs benefit U.S. firms abroad and thus borrower nations are attractive destinations for U.S. foreign direct investment (FDI). Surprisingly, no study has tested the impact of IMF loans on U.S. FDI. Controlling for common explanations in the literature, we use a treatment effects model and interviews with IMF staff researchers to investigate whether countries under different kinds of IMF programs receive more U.S. FDI than countries not under IMF arrangements. Using panel data for 126 developing countries from 1980 to 2003, we find that IMF borrowers tend to be more attractive to U.S. investors but not all IMF programs have the same effect. Our findings suggest that differences in loan duration, the extent of borrower input in policy decisions, and loan amounts affect borrowers’ leverage with the Fund and the U.S.     

The Effect of IMF Programs on Women’s Economic and Political Rights

Though much research has been devoted to the socioeconomic and political consequences of International Monetary Fund (IMF) programs for recipient countries, little is known about the impacts of these programs on the level of respect for women’s rights. We postulate that IMF-induced policy reforms of privatization and public spending cuts, and the growing political repression and instability following the implementation of IMF programs, undermine the government’s ability and willingness to protect women’s economic and political rights. To substantiate the theoretical claims, we combine data on women’s political and economic rights with data on IMF programs for the years 1981–2004. Our findings suggest that IMF involvement is likely to deteriorate the level of respect for women’s economic rights while having no discernible effect on women’s political rights. The results further indicate that the effect of these programs is not conditioned by political regime type and economic wealth of recipient countries. One major policy implication of our findings is that the IMF should start to recognize that the conditions attached to lending programs might be implemented at the expense of women’s economic rights and that more explicit protections of women’s rights need to be included in program negotiations.     

Are IMF lending programs good or bad for democracy?

Have IMF lending programs undermined political democracy in borrowing countries? Building on the extensive literature on conditional lending, we outline several pathways through which IMF program participation might affect the levels of democracy in borrowing countries - including a new variant that suggests the possibility of a positive association between lending program participation and democracy scores. In order to test the argument we assemble annual data from 120 low- and middle-income countries observed (at maximum) in each year between 1971 and 2007. We use three strategies - genetic matching, instrumental variables, and difference-in-differences estimation - to better estimate the direction and size of the statistical association between participation in IMF lending programs and the level of democracy. We find evidence for modest but definitively positive conditional differences in the democracy scores of participating and non-participating countries.     

Economic Sanctions and the Politics of IMF Lending

What effect do economic sanctions have on the IMF lending decisions? Though countries under economic sanctions often face significant economic and financial difficulties, no comprehensive research to date has explored whether the IMF as a de facto lender of last resort intervenes in those countries in need. We posit that economic coercion is likely to hinder the target’s access to IMF credits as sanctioning (sender) countries are likely to use their political influence in the IMF to deny funds to the destabilized target economies. To assess the empirical merits of the hypothesis, we combine data on the IMF lending with the economic sanctions data for 120 emerging market economies from 1975 to 2005. Results indicate that target countries are less likely to receive IMF funds, especially when under sanctions by the United States and international institutions. Our findings contradict the conventional wisdom that the IMF is tasked with providing lifelines to member governments in need of help to ease their short-term balance of payment problems. Further, as much as IMF loans can be used as positive inducements to acquire a country’s strategic cooperation, we show that they might also be used by sender countries as a punishment tool against target countries to amplify the impact of sanctions regimes.     

Conditional on Conditionality: IMF Program Design and Foreign Direct Investment

The article explores how International Monetary Fund (IMF) program design influences foreign direct investment inflows. The author argues that stricter IMF conditionality signals a program-participating government's commitment to economic reforms, as it incurs larger ex ante political cost and risks greater ex post political cost. Thus, the catalytic effect of an IMF program is conditional on conditionality: programs with stricter conditions catalyze more foreign direct investment than those with less stringent conditions. Empirical analysis of the IMF conditionality dataset supports the argument and shows that after accounting for IMF program participation, the more structural conditions included in an IMF program, the more foreign direct investment flows into the country.     

The International Monetary Fund: A review of the recent evidence

A review of recent quantitative studies on the International Monetary Fund reveals that much of the conventional wisdom is incorrect. Recent studies have demonstrated a new degree of methodological rigor, have drawn more heavily upon insights from political science, and have asked a number of new questions. We review studies of participation in IMF programs, design of IMF conditionality, implementation and enforcement of IMF conditions, conventional program effects and catalytic effects. At every stage, we find substantial evidence of the influence of major IMF shareholders, of the Fund’s own organizational imperatives, and of domestic politics within borrowing countries. We conclude that very little is known with certainty about the effects of IMF lending, but that a great deal has been learned about the mechanics of IMF programs that will have to be taken into account in order to obtain unbiased estimates of those effects.

Unpacking Autocracy: Political Regimes and IMF Program Participation

Why do some countries participate in IMF programs while others refuse to do so? We suggest an answer to the question by unpacking one side of the typical democracy–autocracy dichotomy. Specifically, we utilize the growing literature on the varieties of authoritarianism to develop an argument linking the different incentives and constraints that leaders in party-based, personalist, and military regimes face when considering whether to sign agreements with the IMF. Empirically, we demonstrate that distinguishing among autocracies uncovers important variations in the sensitivity of such regimes to the political costs incurred by IMF participation. Party-based autocracies, for instance, respond to both sovereignty costs and the benefits of program participation during severe economic crises. Personalist regimes, however, are not sensitive to the sovereignty costs incurred with IMF participation and thus only participate when doing so provides needed revenue during economic crises. The unique features of military juntas, by contrast, suggests that such regimes are not sensitive to either of these political costs and thus do not respond to economic crises in the same way as their autocratic counterparts.     

“The silent revolution:” How the staff exercise informal governance over IMF lending

This paper examines how the staff exercise informal governance over lending decisions of the International Monetary Fund (IMF or Fund). The essential component of designing any IMF program, assessing the extent to which a borrowing country is likely to fulfill its policy commitments, is based partly on informal staff judgments subject to informal incentives and normative orientations not dictated by formal rules and procedures. Moreover, when country officials are unable to commit to policy goals of the IMF, the IMF staff may bypass the formal channel of policy dialogue through informal contacts and negotiations with more like-minded actors outside the policymaking process. Exercising informal governance in these ways, the staff are motived by informal career advancement incentives and normative orientations associated with the organization’s culture to provide favorable treatment to borrowers composed of policy teams sympathetic toward their policy goals. The presence of these sympathetic interlocutors provides the staff both with greater confidence a lending program will achieve success and an opportunity to support officials who share their policy beliefs. I assess these arguments using a new dataset that proxies shared policy beliefs based on the professional characteristics of IMF staff and developing country officials. The evidence supports these arguments: larger loan commitments are extended to countries where government officials and the Fund staff share similar professional training. The analysis implies informal governance operates in IOs not just via state influence but also through the evolving makeup, incentive structure, and normative orientations of their staffs.     

Master or Servant? Common Agency and the Political Economy of IMF Lending

What explains the substantial variation in the International Monetary Fund's (IMF) lending policies over time and across cases? Some scholars argue that the IMF is the servant of the United States and other powerful member-states, while others contend that the Fund's professional staff acts independently in pursuit of its own bureaucratic interests. I argue that neither of these perspectives, on its own, fully and accurately explains IMF lending behavior. Rather, I propose a "common agency" theory of IMF policymaking, in which the Fund's largest shareholders—the G5 countries that exercise de facto control over the Executive Board (EB)—act collectively as its political principal. Using this framework, I argue that preference heterogeneity among G5 governments is a key determinant of variation in IMF loan size and conditionality. Under certain conditions, preference heterogeneity leads to either conflict or "logrolling" within the EB among the Fund's largest shareholders, while in others it creates scope for the IMF staff to exploit "agency slack" and increase its autonomy. Statistical analysis of an original data set of 197 nonconcessional IMF loans to 47 countries from 1984 to 2003 yields strong support for this framework and its empirical predictions. In clarifying the politics of IMF lending, the article sheds light on the merits of recent policy proposals to reform the Fund and its decision-making rules. More broadly, it furthers our understanding of delegation, agency, and the dynamics of policymaking within international organizations.     

再论振兴东北老工业基地的新思路

东北老工业基地特殊性在于:计划经济体制浓厚、国有经济比重大、重化产业比例大形成的“铁三角”架构,从而在向市场经济体制过渡的同时,会产生显著的沉淀成本。补偿或降低这些沉淀成本,构建完全的市场竞争环境是新形势下振兴东北老工业基地的关键。     

The activities of the institute

The debate on the role of the IMF in low-income countries has recently gained strength in light of the commitment by the international community to support achievement of the Millennium Development Goals by 2015. The IMF fulfils an important role as an information provider to low-income aid-recipient countries and their bilateral donors, who consider Fund signals as a useful device in their allocation decisions. The IMF also provides lending to low-income countries through the Poverty Reduction and Growth Facility (PRGF), established in 1999. The PRGF was designed to address earlier criticism claiming that IMF lending programs to low-income countries had privileged stabilisation over poverty-reducing growth through financial arrangements that had shown little ownership by those countries. The PRGF was meant to support a balanced macroeconomic framework in which low-income economies could pursue growth-enhancing measures with relevant poverty-reducing effects, reflecting policy priorities put forward by the countries themselves. Based on the available evidence, PRGF-supported countries have recorded a favourable growth performance vis-à-vis non-PRGF-supported countries, although the extent to which this outcome has translated into poverty reduction has yet to be assessed.     

试论印度利用FDI的经济效应及启示

外国直接投资（FDI）对东道国经济作用是多维度的,本文从多个视角透析FDI对印度资本形成、技术溢出、产业演进以及贸易结构的作用,从而揭示FDI对印度所产生的经济效应,并提出对中国利用FDI的启示,这对我们进一步认识和把握印度经济发展动态具有重要的战略意义。     

Economic Policy,Political Constraints,and Foreign Direct Investment in Developing Countries

As foreign direct investment (FDI) has become increasingly important in the world economy, a large body of literature has emerged regarding the determinants of FDI flows. Some scholars argue that democracy attracts FDI through the mechanism of political constraints, which reduce the risk of negative policy changes. However, the value of policy stability should be conditional on the attractiveness of contemporary FDI-relevant policies. I therefore propose a theoretically more comprehensive argument: political constraints are attractive to investors when the host country policy environment is FDI-friendly, because these political constraints reduce the probability of negative policy changes in the future. When the policy environment is hostile to FDI, on the other hand, political constraints will have little positive effect, and, to the extent they indicate that FDI-relevant policies are unlikely to improve, may even deter FDI. This argument helps explain why the positive relationship between democracy and FDI seems to emerge after a global shift toward FDI-friendly polices. I find robust empirical support for the argument in tests covering more than 100 developing countries from 1970 to 2014, indicating significant effects using a variety of policy and political constraint measures.     

IMF programs and human rights, 1981–2003

We examined the effects of International Monetary Fund (IMF) supervised programs on changes in government respect for physical integrity rights in developing countries between 1981 and 2003. A longer period under an IMF program increased government use of torture and extra judicial killing and also worsened the overall human rights conditions in developing countries. The use of a two-stage model ruled out the possibility that human rights practices would have worsened even if IMF programs had not been in effect. Previous studies of the impacts of IMF programs also found that they had worsened government respect for human rights. However, those studies did not control for the effects of selection. We found preliminary evidence that the worsened human rights conditions persisted even after the reforms in program lending of the late 1990s.

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Turkey and the IMF: A case study in the political economy of policy implementation

Research into IMF program implementation has usually taken the form of large sample regression analyses. A more detailed explanation is offered in this paper through a case study of program implementation in Turkey between 1999 and 2004. Our research is based on a series of in-depth interviews with policy makers, program negotiators, bureaucrats, interest groups and IMF personnel. Our results reinforce hypotheses that emerge from the theory of implementation and the large sample econometric work, but they also offer new and enhanced explanations. Program implementation depends on a range of factors which interact with one another. These include domestic political economy factors, such as the importance of special interest groups, political cohesiveness and program ownership by the government and the IMF, but also other idiosyncratic factors such as, in the case of Turkey, the existence of a crisis, the desire to join the EU and the role of influential technocrats. Our research has implications for the design of IMF programs.

Campaigning for Capital: Fair Elections and Foreign Investment in Comparative Perspective

This article makes several contributions to the literature on political risk and the determinants of capital inflows. First, I clarify the relationship between capital flows and democracy’s constituent parts in a way that takes arguments beyond aggregate democracy indicators and static political institutional structures. Specifically, I argue that fair elections signal government respect for democracy and the rule of law in a highly visible manner investors can access. I show how investors therefore use the fairness of elections as a way to assess political risk and to inform their investment strategies. However, the type of investment and the kinds of evidence of electoral misbehavior condition elections’ influence on capital flows. I also disaggregate capital flows into foreign direct investment (FDI) and portfolio investment. I argue that the logic of investing is different in the short term (portfolio) versus the long term (FDI). When it comes to political risk, I provide evidence that portfolio investment is much more sensitive to risk factors than FDI because of the relative ease with which portfolio investors can extricate themselves from an increasingly risky market and seek safer returns elsewhere compared to direct investors.     

Coercive Assets? Foreign Direct Investment and the Use of Economic Sanctions

How does foreign direct investment (FDI) affect the use of economic coercion? This article argues that while FDI matters, the effect depends on the entry mode of the FDI. The economic interdependence created by FDI does not have a monotonic effect on economic statecraft because the relative costs incurred by economic disruption differ depending on the forms of foreign investment. In particular, the FDI that creates wholly-owned subsidiaries (for example, cross-border mergers and aquisitions) imposes greater costs to the sender's firms than cross-border joint ventures with local partners, while FDI through joint ventures incurs greater costs for the host than the home country and its firms. By utilizing US sanction episodes from the Threat and Imposition of Economic Sanctions (TIES) dataset, the empirical analysis supports the argument. The results show that economic sanctions are less likely to occur as the share of FDI through cross-border mergers and acquisitions increases.     

FDI对中国产权制度变迁的影响

迄今为止,学术界关于FD I技术外溢效应和产业结构效应的研究不胜枚举,但对制度变迁效应则很少问津。产权是制度的基础,产权结构的无效率必然导致制度结构的无效率,因此一国制度建设的核心是对产权的明确界定和切实保护,相应地,制度创新的一个重要内容就是产权结构的创新。明晰产权,调整不合理的产权结构,是推进改革和制度变迁进程的重要前提和有效力量。FD I对我国产权制度变迁有多方面的影响,主要体现在:FD I促进了我国产权交易的进行;FD I的进入提高了产权结构的效率。FD I主要通过竞争机制、外资并购、改变国企改革的条件、外资优惠政策4个方面影响了我国产权制度的变迁。