IMF, Democracy and Economic Development

Nikolaos Alexandros Psofogiorgos () and Theodore Metaxas
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Nikolaos Alexandros Psofogiorgos: Department of Economics, University of Thessaly, Volos, Greece

Bulletin of Political Economy, 2017, vol. 11, issue 1, 21-44

Abstract: In this article, we are going to analyze all the aspects around the connection between IMF Democracy and Economic Development. When IMF gives large loans in a country, its need to protect its capital, leads in a mitigation of the passion with which the conditions are imposed. The impact of an IMF loan is marginally significant negative variable to democracy, according to some studies. On the other hand, by using the statistical procedure called “matching†method, we are going to have more credible estimates of the impact of the IMF on democracy. In this procedure, Jasjeet Sekhon’s genetic matching routine is used to generate balanced subsamples for both of outcome variables each treated case is paired with a control case via one-to-one nearest neighbor matching with replacement. Each case is matched on all of the confounding covariates. The result is the fact that IMF programs are associated with increases in the level of democracy. Also, countries that spend more time under the IMF lending programs experience big improvements in the level of democracy. The available theoretical and empirical observations show convincingly that the negotiation process allows governments borrowers to maintain some influence on the IMF program content and therefore on the redistributive impact of these programs. When there are low levels of competition, as in authoritarian regimes, political leaders have an incentive to use their monopoly power and the deficient in public services, whereas in democracies, where there is competition in politics, leaders operate as regulated monopolies, providing most public services in an effort to maintain the edge over their opponents. Finally, the effect of IMF involvement on crisis depends on the state of the economy. Despite the limitations in the extent of the article, we are going to include as much data as possible in order to create a spherical view about the connection between IMF, democracy and economic development.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:awu:journl:v:11:y:2017:i:1:p:21-44

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