IMF Conditionality and Program Ownership: A Case for Streamlined Conditionality

S. Nuri Erbas

Emerging Markets Finance and Trade, 2004, vol. 40, issue 3, 10-25

Abstract: Program conditionality and ownership are important considerations in the International Monetary Fund's current rethinking of program design. This paper contributes to the literature by developing a theory of program conditionality and ownership on the basis of Cumulative Prospect Theory. The policymaker may value a set of programs, each with fewer conditions, more than an extended program with as many conditions. This valuation bias is greater in ambiguity (Knightian uncertainty) than under uncertainty. If greater valuation of a program engenders more explicit and implicit ownership, then programs with fewer conditions may have a better chance of success. Less is more.

Keywords: ambiguity; IMF conditionality; program ownership; uncertainty (search for similar items in EconPapers)
Date: 2004
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