Congressional voting on funding the international financial institutions

The United States is the largest contributor to the International Monetary Fund (IMF) and the World Bank, providing resources in exchange for voting power in these international financial institutions (IFIs). While the Treasury Department manages the day-to-day aspects of US participation in these institutions, Congress retains authority on funding. With the aim of understanding the microincentives of US support for the IFIs, I analyze congressional voting on bills to fund the IFIs. I argue that members of congress are more likely to support a funding increase (1) the more “liberal” their ideology, (2) the larger the share of campaign contributions they get from banks that specialize in international lending, and (3) the larger the share of voters that gain from economic globalization that reside in their districts. Statistical analyses of voting on five IFI funding bills since 1977 provide support for these arguments.

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The institutional failures of International Monetary Fund conditionality

The purpose of this paper is to propose an analytical framework integrating the diverse explanations of the failure of IMF conditionality. The IMF is a key player in the running of markets in a global economy. The institutional failures of IMF conditionality are appreciated at two complementary levels: (a) its intrinsic bureaucratic bias, and (b) the inability of the IMF to manage the institutional change required for the development of market processes. A new approach of conditionality suggests the separation of the role of the IMF as financial backer from its role as adviser to countries confronted by the globalization process.

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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Electronic Supplementary Material  The online version of this article (doi:) contains supplementary material, which is available to authorized users.

The new impetus towards economic integration between Europe and Asia

With the end of the Cold War and the collapse of the Soviet Union the large economic space of the Eurasian super-continent has also become part of the world-wide globalization process. How this process of integration of Eurasia is proceeding in key areas of cross-continental linkages is of great importance for the future of the region and for the future of the World as a whole. One of the key questions will be whether the regional and global institutions can provide adequate support for this integration process.This paper was presented as a keynote speech at The Fourteenth OSCE Economic Forum in Vienna on 23 January 2006. It draws on a longer paper by (Linn and Tiomkin in press).The authors are, respectively, Executive Director of the Wolfensohn Initiative at The Brookings Institution, Washington, DC, USA, and MBA and MPA/ID candidate at Harvard University. Johannes Linn served as Vice President for Europe and Central Asia at the World Bank from 1996 to 2003.

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Operational oceanography in Indonesia

In 2005 Indonesian and European institutes joined to start the first step for the implementation of an Ocean Operational System in the Indonesian archipelago. The system will support the decision making process for the sustainable use of marine resources, providing useful information and added value products as well as a service for an improved management of the sea with high business impact to targeted groups as public authorities and commercial operators (coastal managers, fishermen, shipping companies). In this paper the System is shortly described with its potential benefits and economic and social impacts.

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Are economic forecasts of the International Monetary Fund politically biased? A public choice analysis

The paper shows that the economic forecasts of the IMF are frequently distorted by political bias. Longer-term growth forecasts for the industrial countries reveal an absolute as well as relative optimism bias and a significant correlation with election dates in the US. Furthermore, the IMF projections for the developing regions are strongly biased toward optimism. The significant relationship between forecast errors and IMF net credit flows to a region supports the hypothesis that the IMF staff tries to legitimize its lending activities with overly optimistic forecasts.

IMF retrospective and prospective: A public goods viewpoint

The paper investigates changes in IMF activities using the analytical framework of international public goods. The IMF promotes international financial stability, whose outputs are joint products with varying degrees of publicness. In recent years, IMF loans (recipient-specific benefits) have assumed decreased importance, while the Fund’s technical assistance and monitoring activities have taken on greater importance. As a consequence, the club and purely public outputs (e.g., disseminating best practices) have grown as a share of IMF activities. Changes in the mix of IMF activities alter the mix of international public goods and, in so doing, change policy recommendations regarding the role of IMF. The future of IMF is also addressed, especially in light of increased private capital flows.

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.

Potential Benefits from a Deep EU–India Free Trade Agreement

Both parties to an eventual EU India FTA have agreed that it should not merely address tariff barriers but should also go further into what is known as deep integration, originally developed in the 1990s by R.Z. Lawrence. This relates to the removal of all obstacles to cross border business whether actual trade barriers or domestic regulations. We distinguish deep institutional integration from the deep integration of markets. We ask the question how one may support the other. There are potential market failures that can be addressed by trans-national rules on standards and technical regulations and services, but we conclude that the biggest impact of a deep RTA would be on the domestic economy of India if it provides an opportunity for reform. It should be noted that the paper draws on a study undertaken by the authors for DG Trade, but it represents only the views of the authors.

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The implementation of IMF programs: A conceptual framework

IMF supported programs have conventionally been assessed by examining their effects on intermediate variables and final outcomes. More recently greater attention has been paid to their implementation, on the assumption that in order to work programs need to be implemented. Empirical studies have begun to include political economy variables in an attempt to explain implementation. They have used the concept of ‘ownership’ to provide a theoretical foundation. This paper provides an alternative and simple conceptual framework based on the marginal benefits and costs of implementation. It goes on to discuss policies that might be expected to improve implementation based on this framework.

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.

The awakening of the red dragon. China fills the power vacuum in the Far East

The paper analyses the basic parameters of the power of China, according to Geopolitical Theory. Even though the authors adopt a critical approach on some aspects of the geopolitical theory, the geopolitical analysis elucidates the interests of China and the United States and focuses on the way of which the American decision-making system perceives China. The article interprets the geopolitical role of China, starting from the origins of geopolitical theory to the contemporary international relations theory. In addition, it focuses on the current geo-strategic context of the Far East. It analyses Chinas' strategic thinking, China's nuclear doctrine and its military power as compared to the neighbouring countries and as a major player in the world economy.

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Should it be curtains for some of the IMF’s lending windows?

Increasing attention is being paid to IMF governance and operations, but not to how IMF programs are differentiated under the array of available lending windows. This paper examines empirically the economic and political circumstances associated with the use of IMF facilities. It therefore extends existing research into the determinants of IMF arrangements by investigating the extent to which different influences are at work in the case of different facilities. Focusing initially on extended arrangements as compared to stand-bys, the results indicate that although initially the facilities were used in different economic circumstances, since the mid 1980s these differences have largely disappeared. Instead the differences between user countries have become more political than economic. There are, however, some differences between concessionary and non-concessionary facilities beyond the income levels of countries using them. The policy implications for the range and design of the Fund’s lending windows are discussed.

IMF staff: Missing link in fund reform proposals

Current IMF reform proposals are preoccupied with changing governance structures by reallocating Executive Board chairs and quota shares and with expanding and altering the Fund’s surveillance role, but not enough attention has been paid to whether organizational change at the staff level is also needed. IMF staff have intellectual dominance and discretion in the design of loan conditionality, writing of surveillance reports, and provision of technical and policy advice. There are also clear internal and external criticisms of how the Fund’s organizational culture—that is perceived to be hierarchical, technical/economistic, bureaucratic, and homogeneous/conforming—negatively affects the Fund’s policy output and relationship with borrowing members. This article suggests altering ’how things are done’ at the IMF by making changes to recruitment and organizational structure.

International institutions and market expectations: Stock price responses to the WTO ruling on the 2002 U.S. steel tariffs

Many scholars assert that international institutions have little power to enforce laws, punish offenders, or force compliance. Others stress that international institutions are important actors, specifically in the regulation of international trade. In this paper, I show that the recent trade dispute over U.S. steel protection provides us with a critical case to evaluate the role of the World Trade Organization in settling trade disputes and specifically stabilizing expectations of market actors over future steel policy. I argue that stock prices can serve as an important tool in answering these questions. In an empirical analysis using daily steel stock prices, I find that during the 2002 WTO steel case, the WTO dispute mechanism helped market actors stabilize expectations of future trade policy.

Visas and work permits: Possible global negotiating initiatives

We discuss global options for initiatives intended to ameliorate adverse impacts of visa and work permit systems used by national governments around the world. We first describe and document some of their effects, noting the relative lack of other research work on these issues. We then discuss proposals for a new and supplemental global visa structure which have been made as part of the Mode 4 GATS negotiations in the WTO, suggesting that the GATS/WTO may be an imperfect institutional location for negotiating on these matters. We then evaluate other approaches, including what realistically could be possible if a new body specifically created for global negotiation in the area were to be used.

IMF conditionality: An approach based on the theory of special interest politics

Financial assistance provided by the International Monetary Fund (IMF) and other International Financial Institutions (IFIs) aims to help member countries reduce their economic policy distortions. Because these distortions are endogenously generated, it is important to understand how IFI assistance interacts with the domestic political economy. In this paper, we review recent models of IFI conditional assistance that are based on the theory of special interest politics (Grossman and Helpman 2001). In these models, governments adopt inefficient economic policies and instruments because of lobbying by interest groups. IFI assistance helps reduce these inefficiencies, at least under perfect and symmetric information, and provided IFIs are representative of the general public in creditor and debtor countries. Factors limiting the effectiveness of conditional assistance as an incentive system are also identified. These are related to information asymmetries, the potential for political instability in debtor countries, and the IFIs’ own financial solvency.

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.

Power delegation and the European Central Bank's democratic deficit

Delegation involves both costs and benefits. That is to say that delegation is problematic as the principal and agent may have conflicting interests in any act of delegation. Related to this puzzle, I focus on the issue of democratic deficit in the European Central Bank (ECB) as a consequence of power delegation by the European Union (EU) member states in the euro area. Critics claim that the ECB suffers from a democratic deficit as the Bank is seen immune from the people of the euro area, although it profoundly affects their everyday life. The fact that the ECB is a supranational non-majoritarian institution and distances itself from national political arenas further intensifies the issue. Hence, this article aims to evaluate the alleged democratic deficit of the ECB.

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Transregional security cooperation after September 11, 2001

The aim of this article is to answer the question what kind of global security architecture emerged after September 11 and what functions Europe, East Asia and the United States assumed in this triadic structure. The empirical findings reveal that the transpacific security cooperation is the strengthening link in this global security structure, the transatlantic security cooperation the weakening one and the Asia–Europe Security Cooperation is to be seen as the emerging link. In order to explain these different institutional manifestations of transregional cooperation, different theories of International Relations are applied to the three cases. It comes as no surprise that neoinstitutionalism and constructivism offer the best insights into the formation and development of international institutions.

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