Playing Favorites: How Shared Beliefs Shape the IMF's Lending Decisions

Abstract

International organizations (IOs) suffuse world politics, but the International Monetary Fund (IMF) stands out as an unusually important IO. My research suggests that IMF lending is systematically biased. Preferential treatment is largely driven by the degree of similarity between beliefs held by IMF officials and key economic policy-makers in the borrowing country. This article describes the IMF's ideational culture as “neoliberal,” and assumes it to be stable during the observation window (1980–2000). The beliefs of top economic policy-makers in borrowing countries, however, vary in terms of their distance from IMF officials' beliefs. When fellow neoliberals control the top economic policy posts the distance between the means of the policy team's beliefs and the IMF narrows; consequently, IMF loans become less onerous, more generous, and less rigorously enforced. I gathered data on the number of conditions and the relative size of loans for 486 programs in the years between 1980 and 2000. I collected data on waivers, which allow countries that have missed binding conditions to continue to access funds, as an indicator for enforcement. I rely on indirect indicators, gleaned from a new data set that contains biographical details of more than 2,000 policy-makers in ninety developing countries, to construct a measure of the proportion of the top policy officials that are fellow neoliberals. The evidence from a battery of statistical tests reveals that as the proportion of neoliberals in the borrowing government increases, IMF deals get comparatively sweeter.

International demands for austerity: Examining the impact of the IMF on the public sector

“…20 This finding suggests that IMF loan conditions do not necessarily reflect underlying economic fundamentals. This observation is consistent with others studies that suggest politics-rather than economics aloneshape IMF loan conditions (Caraway et al 2012;Chapman et al 2015;Dreher et al 2015;Nelson 2014;Rickard and Caraway 2014). However, we found no robust political variables in our probit models of public sector conditions.…”

The Economics of the Democratic Deficit: The Effect of IMF Programs on Inequality

“…Studies have tracked IMF decision-making to a "neoliberal" ideational culture prevalent among IMF officials resulting from their educational background (Chwieroth 2007). The finding that program countries with policy-makers whose beliefs are closer to this ideational culture receive favorable treatment from the Fund supports this argument (Nelson 2014). According to this line of research, IMF decision-making is biased towards "neoliberal", market-based responses to economic problems while Fund officials advocating for government intervention in market processes and outcomes are underrepresented (Chorev and Babb 2009;Chwieroth 2007Chwieroth , 2010Stiglitz 2002).…”

Professional ties that bind: how normative orientations shape IMF conditionality

“…Woods (2006) suggests the IMF may be inclined to support sympathetic interlocutors in borrowing countries. Others go further by arguing that the IMF plays favorites by providing preferential treatment in the design of conditionality to those countries whose officials share the organization's policy preferences (Nelson 2014b). …”