EconPapers    
Economics at your fingertips  
 

International demands for austerity: examining the impact of the IMF on the public sector

Stephanie J. Rickard and Teri L. Caraway

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: What effects do International Monetary Fund (IMF) loans have on borrow-ing countries? Even after decades of research, no consensus exists. We offer a straight-forward explanation for the seemingly mixed effects of IMF loans. We argue thatdifferent loans have different effects because of the varied conditions attached to IMFfinancing. To demonstrate this point, we investigate IMF loans with and withoutconditions that require public sector reforms in exchange for financing. We find thatthe addition of a public sector reform condition to a country’s IMF program signifi-cantly reduces government spending on the public sector wage bill. This evidencesuggest that conditions are a key mechanism linking IMF lending to policy outcomes.Although IMF loans with public sector conditions prompt cuts to the wage bill in theshort-term, these cuts do not persist in the longer-term. Borrowers backslide oninternationally mandated spending cuts in response to domestic political pressures.

JEL-codes: F3 G3 E6 (search for similar items in EconPapers)
Date: 2018-01-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Published in Review of International Organizations, 25, January, 2018. ISSN: 1559-7431

Downloads: (external link)
http://eprints.lse.ac.uk/86636/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:86636

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().

 
Page updated 2020-06-02
Handle: RePEc:ehl:lserod:86636