On US politics and IMF lending
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On US politics and IMF lending. / Andersen, Thomas Barnebeck; Harr, Thomas; Tarp, Finn.
In: European Economic Review, Vol. 50, No. 7, 2006, p. 1843-1862.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - On US politics and IMF lending
AU - Andersen, Thomas Barnebeck
AU - Harr, Thomas
AU - Tarp, Finn
N1 - JEL Classification: F33, F34, O1
PY - 2006
Y1 - 2006
N2 - The political factors shaping IMF lending to developing countries have attracted attention in recent empirical work. This goes in particular for the role and influence of the US. However, scant formal modelling makes interpretation of empirical results difficult. In this paper, we propose a model in which the US acts as principal within the IMF and seeks to maximize its impact on the policy stance of debtor countries. We derive an optimal loan allocation mechanism, which leads to the testable hypothesis that the probability of an IMF loan is increasing in the amount of political concessions countries make. A political concession is defined as the distance between a country's bliss point and its actual policy stance measured relative to the US. We introduce a bliss-point proxy and demonstrate that our hypothesis is strongly supported in the data. Moreover, we show that not accounting for bliss points may lead to endogeneity bias in empirical work
AB - The political factors shaping IMF lending to developing countries have attracted attention in recent empirical work. This goes in particular for the role and influence of the US. However, scant formal modelling makes interpretation of empirical results difficult. In this paper, we propose a model in which the US acts as principal within the IMF and seeks to maximize its impact on the policy stance of debtor countries. We derive an optimal loan allocation mechanism, which leads to the testable hypothesis that the probability of an IMF loan is increasing in the amount of political concessions countries make. A political concession is defined as the distance between a country's bliss point and its actual policy stance measured relative to the US. We introduce a bliss-point proxy and demonstrate that our hypothesis is strongly supported in the data. Moreover, we show that not accounting for bliss points may lead to endogeneity bias in empirical work
KW - Faculty of Social Sciences
KW - IMF lending
U2 - 10.1016/j.euroecorev.2005.07.001
DO - 10.1016/j.euroecorev.2005.07.001
M3 - Journal article
VL - 50
SP - 1843
EP - 1862
JO - European Economic Review
JF - European Economic Review
SN - 0014-2921
IS - 7
ER -
ID: 313901