RUI - The Political Economy of IMF Surveillance

Seton Hall University, South Orange NJ

Investigators

Abstract

The International Monetary Fund (IMF) has been the focus of a great deal of scholarly attention in recent years. While we increasingly understand how the IMF makes loans, whether or not the conditions attached to these loans will be implemented by borrowing countries, and how to assess the broader effects of these programs, we still know every little about the day-to-day work of the IMF. One of the Fund's main jobs is to engage in annual reviews of member country economies to ensure that countries are adopting growth-enhancing policies. In contrast to the Fund's lending, very little attention has been paid to the IMF's surveillance activities. One of the barriers to learning about surveillance has been that until very recently it was a private dialogue between the Fund and the member country. In recent years, these consultations have become transparent. Country decisions to release information regarding the consultation allow us to understand how the IMF writes its reports and how IMF surveillance affects both the responses of international markets and country economic policies. In addition, understanding cross-country variations in transparency tell us a great deal about how international norms spread. These questions are important not merely because surveillance is unexplored, but also because understanding the effectiveness of IMF surveillance tells us about international cooperation more generally. Scholars study IMF lending because it is an area in which there is enforcement: countries that fail to implement loan conditions lose access to remaining installments of the loan. By contrast, surveillance is not backed by enforcement: any penalties that are incurred by countries not following the IMF?s advice are (presumably) inflicted by international investors who might withdraw capital. Learning about the effects of IMF surveillance helps understand when other international organizations that lack enforcement power can still be consequential. The research strategy to be used in this project is almost exclusively quantitative. Student research assistants will help build datasets on country decisions to make their IMF consultations transparent and on the effects of transparency on international capital markets and country economic policies. In addition, the Principal Investigator will go to the IMF archives to code the Fund's reports (both published and not) to ascertain whether the Fund faces incentives to reveal information about a country's economy accurately. Information from the archival reports will in turn be used to build a dataset as well. This project extends our understanding of one of the most important international organizations in the world. In so doing, it helps us to learn about country incentives for transparency and how transparency matters. Moreover, it helps devise broader lessons for international cooperation in noneconomic areas. Moreover, because this proposed project is under the Research at Undergraduate Institutions designation, it creates a nascent undergraduate research cluster addressing these issues.