Conditionality as an Instrument of Borrower Credibility

Pierre Dhonte

No 1997/002, IMF Policy Discussion Papers from International Monetary Fund

Abstract: Fund member countries that adopt market-friendly policies often encounter a credibility problem—market-friendly policies are not effective in stimulating private investment as long as there remains a significant risk of policy reversal. The root of this risk lies in the discretionary policy-making authority of governments. Committing to a program with the Fund, and endorsing its conditionality, is one instrument available to governments to overcome this difficulty. The paper develops this interpretation of conditionality and indicates some of its operational implications for Fund programs.

Keywords: PDP; Fund; policy; financing; market; options vis-à-vis market participant; Conditionality/Credibility; Fund program; policy framework underpinning IMF conditionality practice; Fund arrangement; market credibility; renewed appreciation; Credit ratings; Global (search for similar items in EconPapers)
Pages: 18
Date: 1997-02-01
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Citations: View citations in EconPapers (27)

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