Regionalizing Multilateralism: Estimating the Power of Potential Regional Voting Blocs in the IMF

This paper explores the voting power of hypothetical regional voting blocs in the Executive Board of the International Monetary Fund. We first discuss the prospect of regionally defined groups becoming more significant in the Fund’s decision-making process. After briefly outlining the IMF’s formal decision procedures, including its weighted voting system, use of special majorities, and the function of voting groups in the Fund’s Executive Board we define three indices of a priori voting power — the Banzhaf, Johnston, and Shapley-Shubik indices — which are then applied to existing voting groups. Following this we simulate several regionally defined a priori coalitions and their potential to influence outcomes in passing resolutions in the Fund using a simple majority. The coalitions we specify are based on the assumption that members of the IMF will form into voting blocs based on regionally-defined preferences. The procedures employed use existing voting weights to project the relative strengths of alternative regional blocs that could emerge within the IMF. Our results indicate that the United States would have the greatest voting power in almost all scenarios. A voting bloc comprised of European countries, however, would be able to dominate the United States unless the U.S. formed an Asia-Pacific bloc. Japan, the PRC, and other Asian countries appear to be unable to form voting blocs that would provide them with more voting power than the United States.     

Explaining IMF lending decisions after the Cold War

This paper empirically investigates the economic and political factors that affect a country??s likelihood to sign an arrangement with the IMF and the determinants of the financial size of such a program. Arguably the world and the global financial architecture underwent structural changes after the ending of Cold War and so did the role of the IMF. Hence, we update and extend the work of Sturm et al. (Economics and Politics 17: 177?C213, 2005) by employing a panel model for 165 countries that focuses on the post-Cold War era, i.e., 1990?C2009. Our results, based on extreme bounds analysis, suggest that some economic and political variables are robustly related to these two dimensions of IMF program decisions. Furthermore, we show that it is important to distinguish between concessional and non-concessional IMF loans.     

The United States Congress and IMF financing, 1944�C2009

Since 1944, United States financing of the International Monetary Fund (IMF) has been appropriated and approved in Congress by roll-call vote. If voting to increase funds to the IMF is viewed as an observable signal of ??support?? for the IMF, these votes provide a historical record of legislative support for the IMF in the United States. I analyze roll-call voting on IMF financing from 1944 to 2009 at both the aggregate (congressional) and the micro (legislator) levels. At the aggregate level, I show that support for the IMF has fallen over time in the House of Representatives but not in the Senate. In the micro-analysis, I use a ??natural experiment?? to establish that this intercameral difference is the result of the Senate??s larger and more heterogeneous constituencies, as opposed to other modeled and unmodeled factors. I also find that legislator support for the IMF is shaped strongly by ideology: regardless of chamber, left-wing legislators are as much as 31 percentage points more likely to support the IMF than right-wing legislators. Yet controlling for ideology, senators are more likely to support the IMF than representatives, and representatives are more sensitive to constituency pressures than senators. I attribute these differences to chamber-specific rules governing the size of constituencies.     

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.     

Renewing IMF surveillance: Transparency, accountability, and independence

In this paper, we present a vision for IMF surveillance that seeks to produce a more accountable, transparent, and independent surveillance process. First, to make surveillance more focused, the IMF’s assessment should be principles-based; that is, the Fund should assess the overall coherence of exchange rate, monetary, fiscal and financial policies, with a view to analyzing their effects on external stability. Second, the IMF should have a governance structure that increases incentives to support candid, transparent assessments of surveillance. In practice, this entails a different role for the Executive Board: the Board will set out the Fund’s strategic framework for surveillance; the Managing Director and the staff will conduct surveillance. These reforms clarify the roles and responsibilities of the IMF and its member countries in the surveillance process. Also, our proposed reforms aim at making surveillance more even-handed and objective. We believe that this principles-based approach can bolster the credibility and legitimacy of surveillance, giving the Fund greater influence on the economic policies of members.

Projecting macroeconomic outcomes: Evidence from the IMF

In the process of designing IMF-supported programs, IMF staff members prepare projections of the evolution of key macroeconomic variables for the participating country. These projections are based on countries?? initial situations, and are conditioned on the implementation of reforms and policy measures agreed in the context of programs. In this paper, we examine the accuracy of projections in 291 programs approved in the period 1993?C2009. We focus on the projections of three macroeconomic variables (the ratios of the fiscal surplus to GDP and of external current account surplus to GDP, and real GDP growth) during the years immediately following the initiation of an IMF-supported program. We identify several potential reasons for divergence of projected from actual values: (i) mismeasured data on initial conditions; (ii) country-specific differences in forming projections, (iii) projections that do not reflect the dynamic time-series process of the actual data; (iv) policy forecast error; and (v) random errors in the actual data. Our data analysis suggests that the incomplete information on initial conditions and the country-specific differences in projection error are the largest contributors to discrepancies between projection and actual. We also consider whether the IMF??s forecasts have gotten more accurate in recent years; there is evidence that they have for the shortest horizons, but the quantitative impact on forecast error is small.     

The IMF returns

The IMF??s role in world financial markets increased following the credit and housing market crises. One good change was the acceptance of a proposal made by the Meltzer Commission to adopt a ??flexible credit line?? that grants responsible borrowers a line of credit to use in emergencies. Some mistaken changes gave the IMF a large increase in lending resources, relaxed the requirements for reform imposed on borrowers, and increased loans to risky borrowers such as Ukraine. Borrowing should be used to prevent the spread of financial crises, not to bailout imprudent borrowers that mismanage their economy.     

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.     

Government co-option of civil society: exploring the AKP’s role within Turkish women’s CSOs

Mainstream academic and policy literature emphasizes the nexus between an active and vibrant civil society sector and greater political accountability. As a result, support for civil society has become central to international policy efforts to strengthen democracy in the Middle East North Africa (MENA) region. However, the empirical evidence presented in this article questions the validity of this assumption. Drawing on information gathered through 38 in-depth qualitative interviews with women’s organizations from across the seven administrative regions of Turkey, and key representatives from the ruling Justice and Development Party (AKP), this article analyses the role of the AKP government in co-opting and influencing women’s organizations in Turkey. The results that emerge demonstrate that the government is actively involved in fashioning a civil society sector that advances their interests and consolidates their power. Independent women’s organizations report that they are becoming increasingly excluded from policy and legislative discussions, as seemingly civic organizations are supported and often created by the government to replace them. These organizations function to disseminate government ideas in society and to provide a cloak of democratic legitimacy to policy decisions. These findings and their implications have significant consequences for theory and policy on civil society and its role in supporting democracy.     

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.     

The Strategic Use of Interests,Rights, and Power to Resolve Disputes

To ensure success in resolving difficult disputes, negotiators mustmake strategic decisions about their negotiation approach. In this essay,we make practical recommendations for negotiation strategy based on Ury,Brett, and Goldberg's (1993) interests, rights, and power framework fordispute resolution and subsequent empirical research by Brett, Shapiro, andLytle (1998). We discuss how negotiations cycle through interests, rights,and power foci; the prevalence of reciprocity; and the one-sided,distributive outcomes that result from reciprocity of rights and powercommunications. We then turn to using interests, rights and powerstrategically in negotiations. We discuss choosing an opening stragegy,breaking conflict spirals of reciprocated rights and power communications,and when and how to use rights and power communications effectively innegotiations.     

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.     

Adverse selection and growth under IMF programs

The dominant approach to studying the effects of IMF programs has emphasized moral hazard, but we find that adverse selection has more impressive effects. We propose a novel strategic selection model to study the growth effects of IMF programs, which allows for the possibility of adverse selection. We find that adverse selection occurs: the countries that are most interested in participating in IMF programs are the least likely to have favorable growth outcomes. Controlling for this selection effect, we find that countries benefit from IMF programs on average in terms of higher growth rates, but that some countries benefit from participation, while others are harmed. Moral hazard predicts that long-term users of Fund resources benefit least from participating in programs, while adverse selection predicts the opposite. Contrary to previous findings, we find that IMF programs have more successful growth performance among long-term users than among short-term users.     

Not Whether,But When? Governments’ Use of Militias in War

Abstract

Although government use of militias during civil conflict can ultimately undermine state authority, governments still use militias for battlefield assistance. This paper examines the selectivity of government decisions to use militias by disaggregating civil conflict to the level of battle phases. Civil-conflict battles typically consist of four phases: preparation, clear, hold, and build. I argue that governments decide to use militias based on the strength of government security forces, operational advantages of militias, and the type of battle phase. Governments will limit the use of militias during key battle phases that are likely to receive increased media attention unless a victory secured by government security forces is unlikely or militias hold an operational advantage. A comparative analysis of the offensive operations in Tikrit and Ramadi during Iraq’s war against the Islamic State of Iraq and Syria (ISIS) lends initial support to this theory.     

How soon is now? The effects of the IMF on economic reforms in Latin America

This study assesses the effects of IMF loans on economic liberalization in Latin America. Specifically, we are interested in whether the Fund receives greater cooperation from Latin American borrowers in the initiation of some economic reforms over others. Using a two-stage treatment effects model as well as panel-corrected standard error (PCSE) regression for 15 Latin American countries from 1980 to 2003, we find that IMF participation tends to lead to greater trade and capital reforms and less reform in privatization. These relationships are tempered by the country??s relationship with the United States along with domestic group pressures.     

Imperfect adaptation: how the WTO and the IMF adjust to shifting power distributions among their members

How do international institutions adjust to shifting power distributions among their members? We argue that institutional adaptations to the rise of emerging and the decline of established powers are different from what power transition theories (PTTs) would lead us to believe. Institutional adaptations are not impossible, as pessimist PTT variants hold; and they are rarely easy to attain, let alone perfect, as optimist PTT variants imply. To bridge the gap between these versions of PTT, we propose an institutionalist power shift theory (IPST) which combines insights on the conditions and mechanisms of institutional change from functionalist, historical and distributive variants of rational institutionalism. IPST claims that institutional adaptations will succeed or fail depending on whether or not emerging powers are able to undermine the international institution and to make credible threats to this effect. To demonstrate IPST’s plausibility we analyze: (1) how India and Brazil gained the agreement of established powers to their membership in the WTO core negotiation group (“Quad”), which had previously been dominated by developed countries; and (2) how China reached agreement with established powers on (more) even-handed surveillance of IMF members’ financial stability, which, up to then, had focused on developing countries and exchange rate issues.     

Poverty Reduction Strategy Papers and the rhetoric of participation

The World Bank and IMF have proposed the Poverty Reduction Strategy Paper (PRSP) framework for all poor countries as a condition of receiving unconditional debt relief under the HIPC Initiative. The PRSPs will also be the key vehicle for the World Bank and IMF and other donors for various assistance packages, including loans. Like its predecessors, the PRSP framework promotes the ideas of ‘participation’ and ‘ownership’. This article argues that ownership of such a grand framework cannot possibly rest with the poor countries or their people if the whole idea is the product of World Bank and IMF think-tanks. It discusses participation in the development of Bangladesh's PRSP and argues that neither participation nor ownership was the target in preparing a national poverty-reduction strategy: they were merely necessary components of a document required for the continuation of debt and lending relationships with the World Bank and IMF.     

Reserves, quotas and the demand for international liquidity

The foreign exchange reserves held by emerging market economies rose significantly in the last decade. This increase has been attributed to a desire by these countries to self-insure themselves against financial shocks. The rise in reserves may also reflect their concerns about the size of their IMF quotas, which set limits on the amount of credit that countries could draw from the IMF, and the conditionality associated with borrowing from the IMF. We offer a model of the choice by central banks between quotas and reserves to demonstrate that emerging markets will choose to hold relatively more reserves than advanced economies. We then investigate the impact of IMF quotas on reserve holdings for a panel of countries during the period of 1980?C2006. In addition to finding evidence of precautionary and mercantilist motives for holding reserves in emerging markets, we also find that reserves in these countries have been inversely related to their IMF quotas.     

“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.     

Civilian power and ‘history‐making’ decisions: German agenda‐setting on Europe

This article examines ‘history‐making’ decisions on Europe by the German government, drawing on the concept of civilian power, which has been refined by international relations theorists, subjecting it to a political science critique. Three case studies ‐ of economic and monetary union (EMU), dual enlargement and European defence and security policy ‐ are discussed and compared with the aim of assessing the value of civilian power for the analysis and explanation of key German decisions. The focus is on agenda‐setting in relation to key ‘history‐making’ decisions. It is argued that German European policy behaviour is better explained by civilian power than realism or neo‐liberal institutionalism. However, civilian power does not adequately capture the complex attitudes and values at work in Germany, the interests brought to bear in a fragmented, sectoralised policy process, the resource limitations on pursuing this approach, and the external conditions for sustaining such a role.