The Strategic Politics of IMF Conditionality

Abstract

The dissertation theorizes how domestic politics in a borrowing country influences the design of IMF conditionality, a set of policy reform measures included in an International Monetary Fund program.Considering the ways in which domestic politics can shape the outcome of negotiation between the IMF and a government, there are two alternative logics that can play out: the government can either tie its hands to the IMF to force reforms to domestic interests or tie its hands to domestic interests to extract a better deal from the IMF.Using a game theoretic model, I demonstrate that the effect of domestic politics on the IMF program design hinges on the interaction of three parameters and suggest the following propositions: a government that is more sensitive to vote losses or less reform-minded is more likely to extract more lenient conditions from the IMF; a government free from electoral pressure receives more conditions; for those governments that are electorally less constrained, the severity of conditionality is limited only when there exist strong domestic interests that can hinder proper implementation of reform conditions.To test the hypotheses, I constructed an original dataset of IMF conditionality by coding all 263 letters of intent agreed in between 1994 and 2006.I coded the number of conditions by conditionality type and by affected economic sector.The empirical

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