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IMF FAVORITISM

IMF FAVORITISM. Session 3. IMF meritocracy?. IMF: YES Some: not for US client states/ US adversaries Others: maybe, for small states with weak bargaining Entails a realist ( gepolitics )- institutionalist (public goods provision) debate. The three rules of IMF favouritism.

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IMF FAVORITISM

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  1. IMF FAVORITISM Session 3

  2. IMF meritocracy? • IMF: YES • Some: not for US client states/ US adversaries • Others: maybe, for small states with weak bargaining • Entails a realist (gepolitics)-institutionalist (public goods provision) debate

  3. The three rules of IMF favouritism 1. ‘TOO LARGE TO FAIL’ MATTERS BUT NOT ALWAYS: Systematically important countries, irrespective of their position towards the US, but confronting severe debt service problems; absent such crisis situations such countries are treated meritocratically 2. GEOPOLITICS MATTERS THE MOST crises are not systemic 3. ECONOMIC INTEREST CROWD OUT NON-SYSTEMIC SECURITY INTEREST

  4. Who controls it? • Powerful principals • Bureaucracy (due to the fragmentation of principals) • Private creditors

  5. Why call in the IMF? • Sovereign debt pressure • Scapegoat • Seal of approval for investors • Leverage to overcome internal veto points

  6. Main IMF functions • Lending • Surveillance

  7. Is the IMF a good thing? • Vreeland: solid evidence that it hurts growth • Why: bad policy design and noncompliance • So: get out of the development business or at least scale down

  8. Mission creep • From exchange rate management (ended in 1973) to balancing two missions: • a. fixing structural weaknesses leading up to balance of payment problems • B. economic growth gnerators

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