Master or Servant? Agency Slack and the Politics of IMF Lending

This paper argues that states and International Monetary Fund bureaucrats exercise partial but incomplete control over the fund’s lending policies. Using an original dataset of IMF lending to 47 countries from 1984-2003, the author finds that "agency slack," or the extent of staff autonomy, is conditional on the intensity and heterogeneity of preferences among the IMF’s largest shareholder countries

Master or Servant? Common Agency and the Political Economy of IMF Lending

What explains the substantial variation in the International Monetary Fund's (IMF) lending policies over time and across cases? Some scholars argue that the IMF is the servant of the United States and other powerful member-states, while others contend that the Fund's professional staff acts independently in pursuit of its own bureaucratic interests. I argue that neither of these perspectives, on its own, fully and accurately explains IMF lending behavior. Rather, I propose a “common agency” theory of IMF policymaking, in which the Fund's largest shareholders—the G5 countries that exercise de facto control over the Executive Board (EB)—act collectively as its political principal. Using this framework, I argue that preference heterogeneity among G5 governments is a key determinant of variation in IMF loan size and conditionality. Under certain conditions, preference heterogeneity leads to either conflict or “logrolling” within the EB among the Fund's largest shareholders, while in others it creates scope for the IMF staff to exploit “agency slack” and increase its autonomy. Statistical analysis of an original data set of 197 nonconcessional IMF loans to 47 countries from 1984 to 2003 yields strong support for this framework and its empirical predictions. In clarifying the politics of IMF lending, the article sheds light on the merits of recent policy proposals to reform the Fund and its decision-making rules. More broadly, it furthers our understanding of delegation, agency, and the dynamics of policymaking within international organizations

Uncertainty, Context, and the Duration of International Agreements

Why are some international agreements set up to operate indefinitely while others are of limited duration? This paper argues that "institutional context" — the existing legal and institutional environment in which states negotiate international agreements — is a significant determinant of states’ choices about the duration of international cooperation

Choose Your Weapon: International Trade Agreements and Exchange Rate Policy Choice

This paper examines the question of whether governments engage in "exchange rate protection" - that is, whether they actively manipulate the exchange rate and/or utilize exchange rate fluctuations as a lever to influence the terms of trade. Using data on 21 countries from 1975-1999, the paper identifies specific conditions under which governments use exchange rate policy as a substitute for trade protection

Ties that Bind? Preferential Trade Agreements and Exchange Rate Policy Choice

This paper examines the question of whether a country's exchange rate policy choices are influenced by membership in preferential trade agreements (PTAs). We argue that PTAs, by constraining a government's ability to employ trade protection, increase its incentives to maintain monetary and fiscal autonomy in order to manipulate the domestic political economy. Consequently, we contend that countries are less likely to adopt or sustain a fixed exchange rate when they have signed a PTA with their “base” country—the country to whom they have traditionally fixed the currency or the major industrial country to whom they have the most extensive trade ties. Likewise, countries that have signed a “base” PTA also tend to have more depreciated/undervalued currencies, as measured by the level of the real exchange rate. Using data on 99 countries from 1975 to 2004, we find strong support for these hypotheses. These findings shed light on the complex relationship between different types of macroeconomic policies in the contemporary world economy. More broadly, they speak to the question of whether international agreements are credible commitment mechanisms when close policy substitutes exist at the domestic level