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The Development and Implementation of IMF and World Bank Conditionality

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  • Dreher, Axel

Abstract

The paper presents a detailed description of IMF and World Bank conditionality and tries to explain changes in this conditionality over time as well as differences between the two institutions. Using panel data it is shown that the number of Fund conditions seem to be influenced by contemporaneous World Bank activity. Moreover, the paper tries to explain compliance with World Bank conditionality as well as interruptions of IMF programs in the recipient countries. Compliance with World Bank conditionality is lower in election years and pre-election years. Breakdowns of IMF programs are less likely in election years. However, no other political factors seem to influence interruptions and compliance systematically. The paper describes the institutions' reaction to recent criticism and concludes with implications for reform. Die mit den Krediten von IWF und Weltbank verknüpften Auflagen haben sich seit der Gründung der beiden internationalen Organisationen stark verändert. Während die Kreditvergabe zunächst nur an wenige Bedingungen geknüpft war, müssen heute eine Vielzahl von zum Teil sehr detaillierten Auflagen erfüllt werden. Diese Auflagen warden zunächst ausführlich beschrieben. Im Anschluss wird aus politisch-ökonomischer Sicht analysiert, welche Faktoren für deren Veränderung sowie Unterschiede in der Auflagenpolitik von Währungsfonds und Weltbank verantwortlich sind. Es wird außerdem versucht, die Zahl der in IWF-Programmen enthaltenen Auflagen ökonometrisch zu erklären. Dabei zeigt sich, dass diese Zahl mit dem gleichzeitigen Engagement der Weltbank in den kreditnehmenden Ländern steigt. Nachdem dargestellt wurde, inwieweit Weltbank- und IWF-Konditionen in der Vergangenheit befolgt wurden und welche Faktoren dafür verantwortlich sein könnten, wird eine weitere ökonometrische Analyse präsentiert. Es zeigt sich, dass die Auflagen der Weltbank vor Wahlen signifikant weniger häufig implementiert werden und dass Zusammenbrüche von IWF-Abkommen in Wahljahren weniger wahrscheinlich sind. Abschließend wird die Reaktion der beiden Institutionen auf die in den letzten Jahren zunehmende Kritik an ihrer Auflagenpolitik dargestellt. Außerdem werden Reformvorschläge unterbreitet.

Suggested Citation

  • Dreher, Axel, 2002. "The Development and Implementation of IMF and World Bank Conditionality," Discussion Paper Series 26352, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26352
    DOI: 10.22004/ag.econ.26352
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    Cited by:

    1. Dreher, Axel & Jensen, Nathan M, 2007. "Independent Actor or Agent? An Empirical Analysis of the Impact of U.S. Interests on International Monetary Fund Conditions," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 105-124, February.
    2. Boockmann, Bernhard & Dreher, Axel, 2003. "The contribution of the IMF and the World Bank to economic freedom," European Journal of Political Economy, Elsevier, vol. 19(3), pages 633-649, September.
    3. Axel Dreher & Nathan Jensen, 2003. "Independent Actor or Agent? An Empirical Analysis of the impact of US interests on IMF Conditions," International Finance 0310004, University Library of Munich, Germany, revised 08 Jan 2004.
    4. Lodewijk Smets & Stephen Knack, 2018. "World Bank Policy Lending and the Quality of Public-Sector Governance," Economic Development and Cultural Change, University of Chicago Press, vol. 67(1), pages 29-54.
    5. Cohen, Joseph N, 2011. "“Economic freedom” and economic growth: questioning the claim that freer markets make societies more prosperous," MPRA Paper 33758, University Library of Munich, Germany.
    6. Sosay, Gül & Zenginobuz, Unal, 2005. "Independent regulatory agencies in emerging economies," MPRA Paper 380, University Library of Munich, Germany.
    7. Hutchison, Michael M. & Noy, Ilan, 2003. "Macroeconomic effects of IMF-sponsored programs in Latin America: output costs, program recidivism and the vicious cycle of failed stabilizations," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 991-1014, December.
    8. Cohen, Joseph N, 2010. "Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?," MPRA Paper 24527, University Library of Munich, Germany.
    9. Oliver Morrissey, 2002. "Recipient Governments' Willingness and Ability to Meet Aid Conditionality: The Effectiveness of Aid Finance and Conditions," WIDER Working Paper Series DP2002-105, World Institute for Development Economic Research (UNU-WIDER).
    10. Robert Hamwey, 2005. "Expanding national policy space for development: Why the Multilateral Trading System must change," Development and Comp Systems 0511005, University Library of Munich, Germany.
    11. Ruxanda Berlinschi, 2010. "Reputation concerns in aid conditionality," The Review of International Organizations, Springer, vol. 5(4), pages 433-459, December.
    12. Josepa Miquel-Florensa, 2007. "Aid Effectiveness: A comparison of Tied and Untied Aid," Working Papers 2007_3, York University, Department of Economics.
    13. Cohen, Joseph N, 2010. "Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?," MPRA Paper 24399, University Library of Munich, Germany.
    14. Hefeker, Carsten, 2003. "Handels- und Finanzarchitektur im Umbruch: Globale Integration und die institutionelle Arbeitsteilung von IWF, Weltbank und WTO," HWWA Discussion Papers 225, Hamburg Institute of International Economics (HWWA).
    15. Oliver Morrissey, 2004. "Conditionality and Aid Effectiveness Re‐evaluated," The World Economy, Wiley Blackwell, vol. 27(2), pages 153-171, February.
    16. Arthur Foch, 2007. "La gouvernance de la Banque mondiale accorde-t-elle le pouvoir décisionnel aux PID membres de l'OCDE ?," Post-Print halshs-00155767, HAL.
    17. Dennis P. Quinn & A. Maria Toyoda, 2007. "Ideology and Voter Preferences as Determinants of Financial Globalization," American Journal of Political Science, John Wiley & Sons, vol. 51(2), pages 344-363, April.
    18. Maike Sippel & Karsten Neuhoff, 2009. "A history of conditionality: lessons for international cooperation on climate policy," Climate Policy, Taylor & Francis Journals, vol. 9(5), pages 481-494, September.
    19. Molly Bauer & Cesi Cruz & Benjamin Graham, 2012. "Democracies only: When do IMF agreements serve as a seal of approval?," The Review of International Organizations, Springer, vol. 7(1), pages 33-58, March.
    20. Josepa Miquel-Florensa, 2007. "Financing Multi-stage projects under moral hazard and limited commitment," Working Papers 2007_4, York University, Department of Economics.
    21. Arthur Foch, 2007. "The governance of the World Bank : analysis and implications of the decisional power of the G10," Post-Print halshs-00235436, HAL.
    22. Peter Moll & Lodewijk Smets, 2020. "Is It the Journey That Matters? A Fresh Look at the Impact of World Bank Policy Lending," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(7), pages 1194-1228, October.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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