1,114 research outputs found

    The Causes and Consequences of IMF Conditionality

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    We develop a public choice model of the International Monetary Fund in which credit and conditionality are simultaneously determined by the demand for, and supply of, IMF credit. A graphical analysis illustrates the comparative statics in response to various shocks. We apply the model to explain the main changes in the rules governing conditionality and in the number of conditions per program. We observe a highly significant positive correlation between the number of conditions per program and the prior use of Fund credit relative to quota in 1959-99. A panel data analysis of 206 letters of intent in 4/1997-2/2003 reveals that the number of conditions depends negatively on international reserves and positively on interest rates in the world capital market, monetary expansion in the borrowing country and the number of World Bank adjustment loans. Finally, the effects of conditionality are analyzed for the first time. Our instrumental-variables estimate shows that the number of conditions does not have a significant effect on any of the five typical instrument and target variables considered. The final section links the analysis of IMF conditionality with the literature on tied transfers in public economics and develops some novel proposals for the reform of IMF conditionality.IMF Conditionality Reform

    FOREIGN EXCHANGE INTERVENTION AND THE POLITICAL BUSINESS CYCLE: A PANEL DATA ANALYSIS

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    By combining expansionary open market operations with sales of foreign exchange, the central bank can expand the monetary base without depreciating the exchange rate. Thus, if there is a monetary political business cycle, sales of foreign exchange are especially likely before elections. Our panel data analysis for up to 158 countries in 1975-2001 supports this hypothesis. Foreign exchange reserves relative to trend GDP depend negatively on the pre-election index regardless of the exchange rate system. The relationship is significant and robust irrespective of the type of electoral variable, the choice of control variables and the estimation technique.Foreign exchange interventions, political business cycles

    Does the IMF cause moral hazard and political business cycles? Evidence from panel data

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    Using panel data for 106 countries in 1971-1997, we estimate generalized least squares regressions to explain IMF lending as well as monetary and fiscal policies in the recipient countries. With respect to moral hazard, we find that a country's rate of monetary expansion and its government budget deficit is higher the less it has exhausted its borrowing potential in the Fund and the more credit it has received from the Fund. Moreover, the budget deficit is shown to be larger the higher the interest subsidy offered by the IMF. As for political business cycles, our evidence indicates that, even with a considerable number of control variables, IMF credits in the more democratic recipient countries are larger in pre-election and post-election years. Thus, IMF lending seems to facilitate the generation of political business cycles, while IMF conditionality may serve as a scapegoat for unpopular corrective measures after the election. The paper concludes with implications for IMF reform.IMF programs, political business cycles, moral hazard

    Foreign Exchange Intervention and the Political Business Cycle: A Panel Data Analysis 

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    Foreign exchange interventions, political business cycles

    The Educational and Professional Background of Central Bankers and its Effect on Inflation – An Empirical Analysis

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    We assume that central banks can control inflation so that inflation rates reflect the preferences of the central bank council.The hypothesis to be tested is that these preferences depend on the central bankers’ educational and/or professional background. In a panel data analysis for the euro area and eleven countries since 1973,we explain inflation first by the weights which the various educational and professional characteristics occupy in the central bank council and second by the education or profession of the median central bank council member. Our results indicate that, with regard to professional background, former members of the central bank staff as well as former bankers and businessmen have the strongest inflation aversion and that former trade unionists and politicians seem to have the highest inflation preference.As for the education of the council members, our results are less robust. However, if the median member of the central bank council has studied business, the inflation rate is significantly lower than if she has studied economics.Central Bank, Monetary policy, Interest groups

    Real exchange-rate changes in the European Community: The empirical evidence and its implications for European currency unification

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    Is the European Community (EC) (already) a desirable currency area? There are two kinds of reasons why it may not. The first reason is that national propensities to inflate may be too different within the EC to permit the aboundonment of exchange-rate changes. Nominal exchange-rate changes are required to make differences in national monetary policies possible as well as to compensate for the resulting differences in the prices of tradable goods and services. The argument is political rather than economic in nature; what is in doubt is essentially the political will of member governments to agree en a common rate of inflation and not so much the economic feasability of such a procedure. - However, there are also economists who have argued that harmonisatian of national inflation rates is likely to produce economic losses, i.e. needless unemployment in sane member countries and needless inflation in others. The assumption that is common to them is that there is a long-run trade -off between inflation and unemployment and that this trade-off (the so-called Phillips curve) is different in different member countries. The validity of these Keynesian assumptions is disputed by modern monetarist theory and refuted by the experience of inflation in this decade: as money illusion is eroded in the process of inflation, the trade-off disappears Governments, it is true, may still be under the Phillips illusion. But this is not to say that inflationrate differentials in the 'Community are an economic rather than a political obstacle to currency unification

    Pathophysiology and Pathogenesis of Endometriosis

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    Alternative methods of reducing government expenditure

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    In recent years spectacular attempts by various major industrialized countries to reduce government expenditure have met with limited success and given rise to heavy controversies. What are the lessons to be learnt? What are the principles to be followed in cutting government expenditure

    Die politisch-ökonomischen Ursachen der Zentralisierungsdynamik

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    "Alternativen der Wirtschaftspolitik"? Das Memorandum der 130: Eine Widerlegung

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    Die sogenannte "Kaufkrafttheorie des Lohnes" ist falsch, da sie die Kostenwirkungen einer Lohnerhöhung nicht angemessen berücksichtigt. Eine Lohnerhöhung führt selbst dann zu einer Gewinnkompression, wenn (a) die umverteilten Gelder ursprünglich kurzfristig nachfrageunwirksam waren, (b) die Arbeitsproduktivität so stark steigt, daß durch die Produktionsausdehnung kaum zusätzliche Kosten entstehen, und wenn (c) es sich um eine geschlossene Wirtschaft handelt. Da der rationale Unternehmer auf eine Verringerung der tatsächlichen und erwarteten Gewinne in jedem Fall mit einer Verminderung seiner arbeitsplatzschaffenden Investitionen reagiert und da Lohnkostenerhöhungen den Anreiz zu Rationalisierungsinvestitionen steigern, würde die "Kaufkrafttherapie" die Arbeitslosigkeit nur weiter verstärken. Führt der Rückgang der Kapitalrendite zu einer Zinssenkung, so kommt es in einer offenen Wirtschaft zu zusätzlichem Nettokapitalexport, so daß sich der Anstieg der inländischen Arbeitsproduktivität vermindert und die Arbeitslosigkeit bei gegebenem Lohnzuwachs steigt. Die "Kaufkrafttheorie" wird durch die Erfahrungen in der Bundesrepublik und anderswo nicht gestützt, sondern widerlegt. Die Fiskalpolitik ist nicht geeignet, eine auch nur konditionale Vollbeschäftigungsgarantie einzulösen. Die stabilisierende Wirkung der Fiskalpolitik sollte sich daraus ergeben, daß sich der Staat als kostenminimierender Spekulant verhält. Sollen die wirtschaftspolitischen Instrumente effizient eingesetzt werden, so lassen sich Arbeitszeitverkürzungen nie "beschäftigungspolitisch", sondern stets nur mit Veränderungen des Freizeitwertes und/oder des Arbeitsleides begründen. Eine Arbeitszeitverkürzung "bei vollem Lohnausgleich" kann die Arbeitslosigkeit nur verschärfen. Technischer Fortschritt und Rationalisierungsinvestitionen sind oft nicht verteilungsneutral, sie sind jedoch stets im Allgemeininteresse in dem Sinne, daß die Gewinner die Verlierer voll entschädigen können, ohne selbst ihren Gewinn ganz aufzugeben. Kapitalexportsteuern und -kontrollen schädigen die ausländischen Arbeitnehmer und können daher nur von einem nationalistischen Arbeitnehmerstandpunkt her begründet werden
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