4 THE PREVIOUS chapter summarized the existing literature on the effectiveness
of the IMF and outlined a series of objections to the current state of the art. It
concluded that there are no clean solutions to the problems inherent in controlgroup approaches that use IMF programs as the unit of analysis, and it would
therefore be more fruitful to develop an alternative approach. Furthermore, the
formal model presented in chapter 2 is not amenable to testing in the traditional
way, using before-after or control-group comparisons, since it does not share
the prediction implicit in such studies that IMF intervention exerts its influence
only during periods when programs are active. Rather, it predicts that the
IMF exerts an effect on countries' policies both when they have programs,
because countries want to avoid program suspensions, and when they do not,
because countries without active programs may hope to take advantage of IMF
financing in the future.The model offers novel testable hypotheses about the pattern of IMF lending—when programs are suspended and when they are resumed—and about
the effect of interaction with the IMF on government policies and investors'
responses. These hypotheses follow from the logic of strategic interaction and,
in some cases, are quite counterintuitive. The tests of the hypotheses reported
in this chapter make it possible to assess indirectly both the effectiveness of
IMF intervention and the variation in that effectiveness across countries and
over time. The hypotheses are as follows:
An Empirical Test of the Model
|1. ||Countries with substantial international influence will be subject to shorter punishment intervals, because the threat of longer punishments is not
|2. ||Influential countries will deviate from their programs more often and
consequently will be subject to more frequent program suspensions;|
|3. ||Countries eligible to participate in IMF programs should have less inflationary policies than countries that are ineligible, regardless of whether
they have active programs in place;|
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Lending Credibility:The International Monetary Fund and the Post-Communist Transition.
Contributors: Randall W. Stone - Author.
Publisher: Princeton University Press.
Place of publication: Princeton, NJ.
Publication year: 2002.
Page number: 59.
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