IMF conditionality and the economic exposure of its shareholders

Abstract

There is substantial evidence that International Monetary Fund policies are driven by the powerful states which intervene to align policy with their preferences. In particular, many have argued that the United States uses its position as the Fund’s largest shareholder to achieve its foreign policy objectives. As a result, a substantial volume of literature argues and presents evidence to support the claim that International Monetary Fund decisions faithfully reflect US interests. My findings extend these claims. Using a new dataset on the presence in International Monetary Fund agreements of binding conditions, which cause the agreement to be suspended or terminated if they are not met, I demonstrate that International Monetary Fund agreements contain fewer binding conditions when a suspension of International Monetary Fund lending plausibly would impose greater hardship on creditor country banks and exporters.