Heeding the Sirens: The Politics of IMF Program Participation

Given similar economic distress indicators, why do some states enter into International Monetary Fund (IMF) programs while others do not? Building on extant studies of IMF program participation that highlight the importance of various economic and political determinants, this article proposes an argument focusing on the political incentives of the IMF and a borrowing country when they engage in IMF program negotiations. Specifically, the study develops a domestic politics argument to highlight the interactions among sovereignty costs, competence costs, economic conditions and domestic regime types, and tests the argument using a cross-national time-series dataset of all IMF agreements between 1970 and 2006. It finds that when the economic crisis is mild, democracies are less likely than non-democracies to enter IMF programs, but that when the economic crisis is severe, democracies are more likely to do so than their autocratic counterparts. The article attributes this tendency to democratic leaders’ electoral vulnerability and shows that these patterns become more pronounced as elections draw near.