IMF conditionality and the theory of special interest politics

This paper presents an analytical discussion of IMF conditionality based on the theory of special interest politics. We outline a simple political-economy model of special interest group politics, extended to include the interaction of the IMF with the government of a country making use of IMF resources. Conditional lending turns the IMF into a benevolent lobby that can exert beneficial impacts on the government's policy choices. In addition to addressing the international spillover effects of national economic policies, conditionality can help reduce policy inefficiencies generated by domestic conflicts of interest and limited ownership. (Comparative Economic Studies / SWP)