International Monetary Fund Agreement Research Articles

“Keep the Receipts:” The Political Economy of IMF Austerity During and After the Crisis Years of 2009 and 2020

Abstract In 2009, the International Monetary Fund (IMF) reformed its lending arrangements and conditionality. Thereafter, it has pursued “parsimony,” emphasizing headline fiscal adjustments rather than detailed budgetary changes. This paper analyzes the extent to which these reforms have resulted in changes to the overall austerity required by IMF agreements. We create a new variable measuring the level of fiscal consolidation required in each IMF program from 2001 through 2021 the IMF Fiscal Adjustment Indicator (IMF FAI). We explore whether IMF austerity eased after the financial crisis and the later COVID-19 pandemic. We also estimate the economic and political determinants that help explain varying levels of IMF austerity across IMF programs during this period. We find that IMF conditions were less austere for the years of 2009 and 2020, but quickly returned to their previous levels, echoing the IMF’s advice to “keep the receipts” during crises. However, these temporary relaxations were not statistically significant, pointing to overarching continuity. We find that countries that were granted relatively more lenient conditionality were found to be those with closer relations with major shareholders of the IMF: Western Europe and the United States. In contrast, countries with close diplomatic relations with China face higher IMF austerity.

Examining the effect of IMF conditionality on natural resource policy

AbstractCan International Monetary Fund (IMF) lending improve natural resource governance in borrowing countries? While most IMF agreements mandate policy reforms in exchange for financial support, compliance with these reforms is mixed at best. The natural resource sector should be no exception. After all, resource windfalls enable short‐term increases in discretionary spending, and office‐seeking politicians are often unwilling to forgo this discretion by reforming the oil, gas, or mining sector. I investigate how and when borrowers go against their political interests and establish natural resource funds—a tool often promoted by the IMF—in the wake of a loan agreement. Using text analysis, statistical models, and qualitative evidence from natural resource policy and IMF conditionality for 74 countries between 1980 and 2019, I show that borrowers under an IMF agreement are more likely to create or regulate a resource fund, particularly if the agreement includes binding conditions that highlight the salience of natural resource reforms. This study contributes to extant research by proposing a new method to extract information from IMF conditions, by introducing a novel dataset on country‐level natural resource policy, and by identifying under what circumstances international reform efforts can help combat the resource curse.

Dumping Humpty-Dumpty

Lebanon’s protests were sparked by economic misery, especially the decline of the long-standing currency peg. What is surprising about the currency collapse is not that it happened at all, but that the country’s unsustainable economic model avoided it for so long. A unique coalition had kept the system going: central bank and finance ministry created rents, banks appropriated rents, politicians were sharing rents, diaspora remittances kept rent-creation going, and foreign governments were tolerating or even underwriting the mechanism. This rentier coalition has now fallen apart. Protestors and critical economists, meanwhile, remain locked out of decision-making by an unaccountable political class. Options for the future include chaos and predation under militia rule, an International Monetary Fund agreement bringing privatization and austerity, a growth-oriented interventionist state put together by technocrats of the left, and grassroots initiatives of mutual aid pioneered by protestors.

The International Monetary Fund’s interventions in food and agriculture: An analysis of loans and conditions

The mandate and competence of the International Monetary Fund (IMF) does not cover food and agriculture policies. While there is anecdotal evidence that the IMF engages in these policies regardless, the state-of-the-art lacks a systematic empirical foundation to identify the extent of its mission creep into these sectors. Based on a combination of machine and human coding, we present a comprehensive database on the IMF’s policy interventions in food and agriculture. Using new data on ‘conditionalities’—policies that governments must implement to access IMF credit—we assess to what extent the IMF has targeted these sectors for the period 1980 to 2014. Our analysis evaluates the agricultural content and ideological orientation of conditions according to whether they promote a developmental state, a night-watchman state, or neither. We find about 2% of all IMF conditions (1105 of 58,406) directly target food and agriculture issues. These are present in 43% of all IMF programs (332 of 781); and affect 100 countries (of the 131 countries that have had an IMF agreement). In addition, our analysis reveals that 59.2% of these conditions embody policy measures in line with night-watchman state policy preferences, 40.1% are model-neutral, and 0.7% developmental. Within the model-neutral category, 23.9% are conditions oriented towards building state capacity; 2.7% have a poverty reduction content; and 2.9% contain pro-environment policies. The IMF’s primary reason for targeting food and agriculture is to enforce fiscal discipline by removing subsidies, yet our analysis identifies that only 8% of these policies abolish subsidies. A more consistent explanation of the IMF’s interest in food and agriculture is its broader mission creep into development policy, and its deep-rooted pro-market ideology.

The effects of the IMF on expropriation of foreign firms

This paper seeks to explain the determinants of foreign expropriation in the developing world. We argue that the International Monetary Fund (IMF) helps to reduce the likelihood of nationalization because of the direct leverage the Fund holds over borrowers, especially as expropriation is a blatant violation of international property rights. Using expropriation data from 1961 to 2006, and several different measures for the Fund, we find that countries under IMF agreements are less likely to nationalize foreign firms. We also show that the Fund’s influence is greatest when the IMF loan represents a larger share of the borrower country’s gross domestic product (GDP) as well as in countries with weaker political institutions. The takeaway is that IMF continues to influence policy choices in the developing world.

Understanding IMF Stand-By Arrangements from the Perspective of International and Domestic Law: The Experience of Venezuela in the 1990s

In the 1990s, the International Monetary Fund (IMF) granted assistance to developing countries that faced severe financial crises in South America. Disbursements of financial assistance were conditioned on the fulfilment of a set of requirements. Conditions were described in the letter of intent addressed to the Fund by the government of the distressed country and linked to an instrument known as ‘stand-by arrangement’ (SBA) agreed between the IMF and the rescued country. The IMF Guidelines on Conditionality state that arrangements are not international agreements. Based on this assumption, SBAs were often agreed by South American governments without legislative authorisation in spite of containing commitments to undertake legal reforms. The implementation of IMF agreements caused tension in developing countries where domestic legal systems required congressional approvals for the adoption of the type of commitments included in a standard SBA.Reviewing a SBA agreed by the IMF and the administration of President Rafael Caldera in 1996 under the so-called ‘Agenda Venezuela’ program, this paper explores the legal nature of SBAs as a form of international law, and the interaction between these arrangements and domestic law. The main argument develops in this paper is that SBAs are international agreements that govern rights and obligations between the IMF and its state members and therefore, governments must comply with the requirements prescribed by the domestic legal system in order to enter into this type of contracts.Presented SIEL Singapore 2012.

IMF conditionality and the economic exposure of its shareholders

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.

Workers of the Less Developed World Unite? A Multilevel Analysis of Unionization in Less Developed Countries

Past scholars of unionization have offered exemplary cross-national studies of affluent democracies and case studies of less developed countries (LDCs). What has been lacking is cross-national research on unionization across LDCs. We conduct a multilevel analysis of the likelihood that a worker is unionized with the late-1990s World Values surveys of 39 LDCs. We propose that unionization in LDCs can be explained by the individual characteristics of workers as well as the country-level factors of institutions, industrialization, and globalization. Our analyses yield several conclusions. First, owing to the legacy of state socialism, ex-communist countries have much higher unionization. Second, our analyses show that class very effectively explains union membership across LDCs. Although skilled manual workers are more unionized than most, educated professionals stand out for their distinctively high unionization. Third, the debt crisis significantly undermined unionization through the institutional influence of International Monetary Fund (IMF) agreements and the globalization pressure of debt service. Despite being the focus of much research, industrialization, democratization, the size of the state, International Labour Organization conventions, and international trade and investment are surprisingly insignificant. Decomposing the sample by communist legacy, signing an IMF agreement is significant in ex-communist countries, and debt service is significant in countries without a communist legacy. Overall, we conclude that the debt crisis has undermined unionization and class remains a powerful basis of mobilization across LDCs.

IMF program compliance: Aggregate index versus policy specific research strategies

Consensus has grown that the economic reform programs of the International Monetary Fund (IMF) have failed to promote economic development. There is little consensus about how IMF programs should be reformed, however, because we do not understand why IMF programs have failed. Some critics contend that the IMF’s austere policy conditions are inappropriate for most program-countries and cause economic crises to deepen. Other critics argue that the policy conditions are actually ignored, and the IMF program loan ends up subsidizing the bad policies that caused the economic crises in the first place. This debate begs the compliance question. Unfortunately, the study of IMF compliance is not straightforward. IMF agreements span many dimensions, and the dimensions vary from agreement to agreement. Even along one dimension, governments are not held to the same standard. Rather than look at aggregate measures of compliance, this article proposes a return to studying specific conditions as was done in the earliest studies on IMF compliance.

Crisis, Conditions, and Capital

A selection model for 68 countries between 1970 and 1998 is used to test the impact of International Monetary Fund(IMF) programs on international capital markets and examine how agreements are perceived by multinational investors. Results reveal that even after controlling for the factors that lead countries to seek IMF support, IMF agreements lead to lower levels of foreign direct investment (FDI). Countries that sign IMF agreements, ceteris paribus, attract 25% less FDI inflows than countries not under IMF agreements.

Dallal, Claimantv. The Islamic Republic of Iran, Bank Mellat (Formerly International Bank of Iran), Respondents

126Arbitration — The law applied by arbitral tribunals — Claim for amount of dishonoured cheques — Whether claimant beneficiary of cheques — International Monetary Fund Agreement — Article VIII, Section 2(b) — Prohibition on enforcement of transactions contrary to exchange controls of another member State — Whether applicable to international arbitral tribunal — Iran–United States Claims Tribunal — Validity of purported currency exchange regulations — Doubts as to nature of underlying transaction — Burden of proof — Whether shifting to claimant when respondent has raised doubts — Plea of unjust enrichment at post-hearing stage — Whether admissible — Whether principle applicable in international arbitral tribunal — The law and practice of the Iran-United States Claims Tribunal

Confederation Life Association v. Ugalde.

International organization and administration — Miscellaneous — International Monetary Fund Agreement (Bretton Woods Agreement) — Applicability to life insurance contract interpretation — The law of the United States of America.Jurisdiction — Miscellaneous — Choice of law — Life — insurance contract — The law of the United States of America.

Theye y Ajuria v. Pan American Life Insurance Co.

Jurisdiction — Miscellaneous — Choice of law — Life — insurance contract — The law of the United States of America.Aliens — Positions of — Treatment by and responsibilities of the receiving State — Termination of political citizenship — Acquisition of civil citizenship — The law of the United States of America.International organization and administration — Miscellaneous — International Monetary Fund Agreement (Bretton Woods Agreement) — Applicability restricted to foreign exchange contracts — The law of the United States of America.

Jurisdiction—extraterritorial effect of law—claims—Cuba—International Monetary Fund Agreement, 1945—effect of Cuban withdrawal from International Monetary Fund Agreement on extraterritorial application of Cuban law

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Proceedings in Banco Do Brasil v. A.C. Israel Commodity Co. (Effect of Brazilian Exchange Control Laws; International Monetary Fund Agreement)

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The Legal Status of Gold

The classical standard of old as it existed in the principal countries until 1914-in this country until 1933-was based on fundamental legal rules: could be freely produced, imported, coined in the mints, melted and exported; the coins were unlimited legal tender and paper money, if legal tender, had to be redeemable in coins. Hence, was the object of extensive legislation concerned primarily with legal powers of the individual. That legislation was municipal throughout. True, the classical standard had developed into an international institution and into one of outstanding significance, but its international status was achieved merely by voluntary co-operation under the leadership of the Bank of England. In our day the classical standard no longer exists. Gold is still the determinant in the principal monetary systems, but only through the financial operations of the monetary authorities (governments, central banks) which try to establish a lasting ratio between the value of their national monetary unit and the value of gold. The law may and ordinarily does prescribe the ratio which ought to be maintained by the authorities,' but basically this gold standard by management is no longer an institution of municipal law to the extent that the classical standard was. On the other hand, the gold standard by management has assumed a status in international law. We refer to the International Monetary Fund Agreement of 1943, in force since 1946, and especially to its par-value regulation.2 According to this regulation, a par value is obligatory for all monetary units of the member states and shall be expressed in terms of as a common denominator, or in terms of the United States' dollar of the weight and fineness in effect on July 1, 1944. That weight, according to the Gold Reserve Act,3 is 15Y'1 grains of Y4o fine (corresponding to $35 for the ounce).4 The language of

Recognition of Exchange Controls after the International Monetary Fund Agreement

Recognition of Exchange Controls after the International Monetary Fund Agreement

United States: International Monetary Fund Agreement and Foreign Exchange Control Regulations-Perutz v. Bohemian Discount Bank in Liquidation (110 N. E. (2d) 6, 304 N. Y. 533 (1953))

United States: International Monetary Fund Agreement and Foreign Exchange Control Regulations Andre van Campenhout Andre van Campenhout *The views expressed in this article are personal to the author and do not necessarily reflect the views of the International Monetary Fund, of which he is the General Counsel. Search for other works by this author on: Oxford Academic Google Scholar The American Journal of Comparative Law, Volume 2, Issue 3, Summer 1953, Pages 389–392, https://doi.org/10.2307/837487 Published: 01 July 1953

Discrimination and International Trade Policy

NON-discrimination and multilateral payments represent the foundations of United States foreign trade and exchange policy. The United States has sought to implement this policy through multilateral agreements, such as the International Monetary Fund Agreement and the Charter for an International Trade Organization, and through bilateral agreements, such as the Anglo-American Financial Agreement.' Most American economists and statesmen consider the universal desirability of nondiscrimination to be a self-evident truth readily deducible from the first principles of economics. But in recent years a number of reputable economists have come forth with strong arguments in favor of trade and exchange discrimination, and these arguments have had an important influence on the formation of international economic policy. It is not enough for economists of the free-trade school to refute these arguments by an application of the principles of classical economics, since the proponents of trade discrimination usually begin by denying the classical postulates.2 Rather the problem must be examined within the institutional framework of the postwar world and its solution worked out in a manner consistent with current economic and political realities. Although the economist would be derelict if he assumed the world as it currently exists as inevitable and incapable of change in response to his counsel, mere deduction from first principles is not likely to solve its problems. The purpose of this paper therefore is to analyze the case for discrimination as objectively and sympathetically as possible, with a view to determining the extent to which the problems that the proponents of discrimination have posed can be dealt with a minimum of violence to the wellknown advantages of non-discriminatory and multilateral trade.