Vested Interests in a Positive Theory of IFI Conditionality
IMF Working Papers, April 1, 2002
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- Vested Interests in a Positive Theory of IFI Conditionality
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Bibliographic details
- Authors: Alex Mourmouras, Wolfgang Mayer
- Published: April 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451849479.001
Summary
- Understanding of the domestic political environment is key to building broad country ownership and the successful implementation of reform programs supported by international financial institutions (IFIs).
- Recipient countries are not unitary actors: policymakers are influenced by special interest groups (SIGs) opposing reforms, leading to distorted policies.
- Using a new model of the financial relations between a benevolent IFI and a sovereign borrower subject to influence by SIGs, the paper analyzes the determinants and welfare impacts of conditional and unconditional assistance.
- While conditionality may raise IFI welfare, economize on the amount of assistance, and lower domestic distortions, it may not always raise recipient country welfare.
- Recipient governments are always better off if assistance is provided unconditionally.
Key findings and analysis
- Conditionality effects:
- May raise IFI welfare.
- May economize on the amount of assistance.
- May lower domestic distortions caused by SIG influence.
- May not always raise recipient country welfare.
- Recipient government welfare:
- Recipient governments are always better off if assistance is provided unconditionally.
- Analytical approach:
- Employs a model of financial relations between a benevolent IFI and a sovereign borrower influenced by special interest groups (SIGs).
Content in this bundle
- Vested Interests in a Positive Theory of IFI Conditionality - WP/02/73