The International Monetary Fund

The International Monetary Fund

Distinguishing Reality from Rhetoric

Graham Bird and Dane Rowlands

There is no shortage of opinion about the International Monetary Fund (IMF). Some see it as the agent of austerity, being manipulated by wealthy nations and forcing poorer countries to pursue economic policies that suppress growth and development. A sharply contrasting view regards it as bailing out such countries with large amounts of soft finance, allowing them to avoid necessary adjustment. The challenge is to evaluate the alternative arguments and to distinguish reality from rhetoric. In this book, the authors undertake a careful and detailed empirical analysis of the underlying issues, covering participation in IMF programs, their implementation and effects on economic growth, and on the willingness of international capital markets to lend.

Chapter 6: The implementation of IMF programs

Graham Bird and Dane Rowlands

Subjects: economics and finance, financial economics and regulation, international economics, politics and public policy, international relations


For many years analysis of IMF conditionality overlooked the extent to which it was implemented. However, more recently, increasing attention has been paid to implementation. Theoretical contributions have focused on the importance of special interest groups, but empirical evidence has failed to provide compelling support for the theory. Indeed, empirical studies have reported mixed results that sometimes seem to be conflicting. This chapter identifies a range of economic, political and institutional factors that may, in principle, influence implementation. Focusing in particular on the irreversible interruption of IMF programs, it tests an econometric model designed to capture these influences over 1992_2004 exploiting improved sources of data. The results suggest that significant determinants of interruption are trade openness, the existence of veto players and the amount of resources committed by the Fund. The chapter interprets the results, tests their robustness, briefly examines cases that initially appear to be inconsistent with the overall findings and discusses the implications of the results for policy.

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