Political Determinants Of IMF Balance of Payments Lending: The Curse of Carabosse?

Abstract

How do political interests shape International Monetary Fund balance of payments lending decisions? We suggest that the institutional structure governing IMF decisionmaking creates an opportunity for American policymakers to influence IMF lending decisions. We then suggest two reasons, one based on interest group politics and one based on foreign policy objectives, why American policymakers have an incentive to exploit this opportunity. These expectations are then evaluated statistically against the entire population of IMF loans between 1985 and 1998 for which data were available. The results indicate that IMF lending decisions are responsive to American pressure. Larger IMF loans went to countries in which American banks were highly exposed and to governments closely allied with the United States. *Authors are listed alphabetically and this order in no way implies primary and secondary authorship. The authors would like to thank Mark Crescenzi, Timothy McKeown, and Brad Verthein for helpful comments.

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