The West’s Teeth: IMF Conditionality During the Cold War
Leonardo Weller and
João Paulo Pessoa
No vxbw9, SocArXiv from Center for Open Science
Was the International Monetary Fund (IMF) susceptible to political pressure from the United States and its Western allies during the Cold War? To answer this question, we construct a new database containing the number of conditions applied to over 500 IMF loans since 1970 and analyze how the distance from a borrowing country to its closet communist neighbor affected the IMF conditionality. We show that the fund imposed fewer conditions on loans to countries geographically closer to the communist bloc. Results are stronger when neighboring communist countries were not part of the Warsaw Pact. This pattern persisted during the 1990s, when the fund helped former communist countries in their transition to market economies. However, we find no strong evidence of such discretionary treatment by the IMF after 2001, when the containment of communism had ceased to be the West’s top priority.
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