nach oben

The Review of International Organizations

Erschienen in:

01.03.2010

The effects of IMF programs on U.S. foreign direct investment in the developing world

verfasst von: Glen Biglaiser, Karl DeRouen Jr

Erschienen in: The Review of International Organizations | Ausgabe 1/2010

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

Given the popular wisdom that the U.S. government influences IMF policies and tends to support the business community, it might be expected that IMF programs benefit U.S. firms abroad and thus borrower nations are attractive destinations for U.S. foreign direct investment (FDI). Surprisingly, no study has tested the impact of IMF loans on U.S. FDI. Controlling for common explanations in the literature, we use a treatment effects model and interviews with IMF staff researchers to investigate whether countries under different kinds of IMF programs receive more U.S. FDI than countries not under IMF arrangements. Using panel data for 126 developing countries from 1980 to 2003, we find that IMF borrowers tend to be more attractive to U.S. investors but not all IMF programs have the same effect. Our findings suggest that differences in loan duration, the extent of borrower input in policy decisions, and loan amounts affect borrowers’ leverage with the Fund and the U.S.

Vorheriger Artikel Interactions among intergovernmental organizations in the anti-corruption realm

Nächster Artikel Emilie M. Hafner-Burton. 2009. Forced to be Good: Why Trade Agreements Boost Human Rights, (Ithaca, Cornell University Press)

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

An exception is the work by Bird and Rowlands (2007), who carefully study the different kinds of IMF programs.

As a disclaimer, the views expressed by IMF staff researchers do not necessarily represent those of the IMF or IMF policy.

See Bird and Rowlands (1997), who are critical of the catalytic effects of IMF programs.

Although market reforms such as trade liberalization are not always favored by investors as tariff jumping to accumulate monopoly rents is an FDI strategy, the movement towards globalization and outsourcing in the developing world has greatly minimized the strategy. In fact, our results will show that trade has a positive and significant effect on FDI inflows, suggesting the limited importance of tariff jumping and increased relevance of market reforms for attracting FDI.

See Bird and Rowlands (2002) Edwards (2006), and Steinwand and Stone (2008) for studies on the effects of different kinds of IMF programs on capital flows.

See Bird (1996) for a comprehensive review of the effect of structural adjustment programs supported by the IMF.

For an excellent history of the IMF, see James (1996). See also Stone (2002) who uses quantitative and qualitative methods to explain IMF influence in post-communist countries.

For a thorough review of the literature that explains why developing countries accept IMF conditions, see Vreeland (2003a, 12–16).

Developed countries generally are not recipients of IMF loans as they increasingly finance their deficits through private capital flows. A recent exception is Iceland.

See de Vries (1986, 165–166), who notes the Fund’s insistence on structural adjustment and reduced protectionism for countries seeking IMF assistance. See also Mourmouras and Rangazas (2004, 3), who argue that Fund “assistance is conditional on recipient countries’ pursuit of agreed macroeconomic and structural policies.”

See Adji et al. (1997) who show that IMF loans have little effect on FDI, however. Similarly, Bird and Rowlands (2002) find that it is difficult to determine whether IMF programs will have positive, negative, or insignificant effects on financial flows. Boockmann and Dreher (2003) and Dreher and Rupprecht (2007) go even further and claim that IMF programs have a negative effect on the initiation of market reforms, which arguably could affect foreign investment.

Most decisions require a simple 50% majority (Vreeland 2003a, 9).

Although the Fund’s Managing Director is traditionally a European, part of a compromise to divvy up top international jobs by nationality (the World Bank’s President is always American), as Barro and Lee (2002, 8) maintain, the U.S. “seems to have exerted the strongest voice at the IMF.”

See also Blomberg and Broz (2007) who show that the United States and other large contributors use their influence at the IMF to advance their interests.

See also Dreher et al. (2009), who document that temporary Security Council membership reduces the number of conditions included in IMF programs—a sign that U.S. politics influences IMF decision making.

For more insights on the use of IMF leverage based on the disbursements of funds through loan conditionality, see Dreher et al. (2009).

We exclude OECD countries because for more than two decades wealthier nations have relied on private capital sources and not the IMF for loan assistance.

Although the IMF issued loans prior to the 1980s, much of the monies appeared as emergency funds that the country never drew upon. It is not until the 1980s that stricter enforcement of loan conditionality and drawing down of loan monies occurs. We also chose to study the post-1980 period because PRGFs did not originate until 1987 and the IMF created EFFs in the 1970s.

Because the BEA suppresses country data for some years (e.g., when a single U.S. firm is the main investor in a country and thus the release of data would provide rival firms with useful information), we follow Rosecrance and Thompson (2003) and consider these data missing.

See Biglaiser and DeRouen (2007, 2009), Jensen (2003, 2004, 2006), Li (2006), and Li and Resnick (2003) that use similar control variables in their FDI work.

See Jensen (2003), Li and Resnick (2003), and Oneal (1994) for a good discussion about the regime-type debate.

PRGF programs did not begin until December 1987 and thus the data start in the late 1980s.

See Abouharb and Cingranelli (2009) who also deal with selection issues in the context of IMF programs.

IMF loan data are available at: http://www.imf.org/external/np/tre/tad/extarr1.cfm.

These tests provide similar results if the robust option is specified with the xtiveg2 command thus making the standard errors robust to heteroskedasticity (see Baum et al. 2003).

For example, unlike the Full Information Maximum Likelihood Estimator (FIML), the two step estimator does not assume jointly normal error distributions.

The Panama case is dropped because it is an extreme outlier in terms of U.S. FDI (the mean U.S. FDI/GDP for Panama is 1.46 and for rest of sample it is about .04).

The results are robust to the inclusion of a year counter in the outcome equation. We also consider the possibility that our measure of trade openness is not actually capturing trade reform. To this end we test the models using the ‘Restrictions’ component of the Economic Globalization measure from the KOF Globalization Index (Dreher 2006b). This measure is a weighted index comprised of hidden import barriers, mean tariff rate, taxes on international trade, and capital account restrictions. The inclusion of this measure does not greatly change the substantive results and is itself only significant in the PRGF model (negative coefficient, at the .10 level). We choose to report the results from the trade openness measure but concede that the variable may not fully capture trade reform. Finally, the results are robust to dropping development and CPI from the right hand side of the selection equation.

See Staiger and Stock (1997) for instrument validity testing.

This being said, upon replacing budget balance with a dummy variable coded as 1 for post-Cold War years, the Anderson (p = .09), Sargan (p = .34) and F-tests (p = .09) become more acceptable and the coefficient for ALL is still positive and significant in the outcome equation. The results are available from the authors.

See also Dell’Ariccia et al. (2006) who find that the IMF’s decisions during the 1998 Russian crisis created a moral hazard issue for bond spreads.

Adji, S. S., et al. (1997). Political capacity, macroeconomic factors, and capital flows. In M. Arbetman & J. Kugler (Eds.), Political capacity and economic behavior (pp. 127–148). Boulder: Westview.

Abouharb, M. R., & Cingranelli, D. L. (2009). IMF Programs and human rights, 1981–2003. Review of International Organizations, 4(1), 47–72.CrossRef

Atoyan, R., & Conway, P. (2006). Evaluating the impact of IMF programs: a comparison of matching and instrumental-variable estimators. Review of International Organizations, 1, 99–124.CrossRef

Babb, S. (2003). The IMF in sociological perspective: a tale of organizational slippage. Studies in Comparative International Development, 38, 3–27.CrossRef

Babb, S., & Buira, A. (2005). Mission creep, mission push and discretion: the case of IMF conditionality. In A. Buira (Ed.), The IMF and the World Bank at sixty (pp. 59–83). London: Anthem.

Barro, R. J., & Lee, J-W. (2002). IMF Programs: who is chosen and what are the effects? National Bureau of Economic Research Working Paper 8951.

Baum, C. (2006). An introduction to modern econometrics using Stata. College Station: Stata.

Baum, C., Schaffer, M., & Stillman, S. (2003). Instrumental variables and GMM: Estimation and Testing. Boston College Working Paper in Economics No. 545. http://fmwww.bc.edu/ec-p/WP545.pdf

Beck, N. (2005). Time series cross-section data - dynamics—continuous. Oxford Spring School notes. http://www.nyu.edu/classes/nbeck/q2/morning.short.pdf

Biglaiser, G., & DeRouen, K., Jr. (2007). Following the flag: troop deployment and U.S. foreign direct investment. International Studies Quarterly, 51, 835–854.CrossRef

Biglaiser, G., & DeRouen, K., Jr. (2009). The interdependence of U.S. troop deployments and trade in the developing world. Foreign Policy Analysis, 5, 247–263.CrossRef

Bird, G. (1996). The International Monetary Fund and developing countries: a review of the evidence and policy options. International Organization, 50, 477–511.CrossRef

Bird, G., & Rowlands, D. (1997). The catalytic effect of lending by international financial institutions. World Development, 20, 967–991.

Bird, G., & Rowlands, D. (2002). Do IMF programmes have a catalytic effect on other international capital flows? Oxford Development Studies, 30, 229–249.CrossRef

Bird, G., & Rowlands, D. (2007). Should it be curtains for some of the IMF’s lending windows? Review of International Organizations, 2, 281–299.CrossRef

Block, F. (1977). The origins of international economic disorder: A study of United States International Monetary Policy from World War II to the present. Berkeley: University of California Press.

Blomberg, S. B., & Broz, J. L. (2007). The Political Economy of IMF Voting Power and Quotas (August 23). Available at SSRN: http://ssrn.com/abstract=1080316

Boockmann, B., & Dreher, A. (2003). The contribution of the IMF and the World Bank to economic freedom. European Journal of Political Economy, 19(3), 633–649.CrossRef

Chwieroth, J. (2005). U.S. policy, IMF financing agreements, and the coercive diffusion of capital account liberalization to emerging markets. EUI Working Paper RSCAS No. 2005/06. http://cadmus.eui.eu/dspace/bitstream/1814/2793/1/05_06.pdf

Collier, P., & Gunning, J. W. (1999). The IMF’s role in structural adjustment. The Economic Journal, 109, F634–F651.CrossRef

Dell’Ariccia, G., Schnabel, I., & Zettelmeyer, J. (2006). How do official bailouts affect the risk of investing in emerging markets? Journal of Money, Credit and Banking, 38(7), 1689–714.CrossRef

De Vries, M. G. (1986). The IMF in a changing world 1945–85. Washington, DC: IMF.

Dicks-Mireaux, L., et al. (2000). Evaluating the effect of IMF lending to low income countries. Journal of Development Economics, 61, 495–526.CrossRef

Dreher, A. (2006a). IMF and economic growth: the effects of programs, loans, and compliance with conditionality. World Development, 34, 765–788.CrossRef

Dreher, A. (2006b). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics, 38(10), 1091–1110.CrossRef

Dreher, A., & Jensen, N. M. (2007). Independent actor or agent? An empirical analysis of the impact of US interests on IMF conditions. Journal of Law and Economics, 50(1), 105–124.CrossRef

Dreher, A., & Rupprecht, S. M. (2007). IMF programs and reforms—Inhibition or encouragement? Economics Letters, 95, 320–326.CrossRef

Dreher, A., Sturm, J-E., & Vreeland, J. R. (2009). Global horse trading: IMF loans for votes in the United Nations Security Council. European Economic Review. In press.

Edwards, M. S. (2005). Investor responses to IMF program suspensions: is noncompliance costly? Social Science Quarterly, 86(4), 857–873.CrossRef

Edwards, M. S. (2006). Signalling credibility? The IMF and catalytic finance. Journal of International Relations and Development, 9(1), 1–26.CrossRef

Edwards, S. (1995). Crisis and reform in Latin America: From despair to hope. New York: Oxford University Press.

Eichengreen, B. (1996). Globalizing capital: A history of the International Monetary System. Princeton: Princeton University Press.

Feldstein, M. (1998). Refocusing the IMF. Foreign Affairs March/April.

Fischer, S. (1999). On the need for an international lender of last resort. Paper prepared for the joint luncheon of the American Economic Association and the American Finance Association, New York, January 3. Available at www.imf.org

Frieden, J. A. (1991). Debt, development, and democracy: Modern political economy in Latin America. Princeton: Princeton University Press.

Gastanaga, V. M., Nugent, J. B., & Pashamova, B. (1998). Host country reforms and FDI inflows: how much difference do they make? World Development, 26, 1299–1314.CrossRef

Gould, E. R. (2003). Money talks: supplemental financiers and conditionality. International Organization, 57(3), 551–586.CrossRef

Grosse, R. (1997). Foreign direct investment in Latin America. In R. Grosse (Ed.), Generating savings for Latin American development (pp. 135–153). Coral Gables: North-South Center Press, University of Miami.

Hajivassiliou, V. A. (1987). The external debt repayment problems of LDCs: an econometric model based on panel data. Journal of Econometrics, 36, 205–230.CrossRef

Harrigan, J., Wang, C., & El-Said, H. (2006). The economic and political determinants of IMF and World Bank lending in the Middle East and North Africa. World Development, 34(2), 247–270.CrossRef

IMF. (2001). Structural conditionality in fund-supported programs. Prepared by the Policy Development and Review Department. Accessed on February 11, 2006. http://www.internationalmonetaryfund.com/external/np/pdr/cond/2001/eng/struct/cond.pdf

IMF. (2006a). Phone interview with an IMF researcher (name withheld for confidentiality) on April 21, 2006.

IMF. (2006b). Phone interview with an IMF researcher (name withheld for confidentiality) on April 25, 2006.

IMF. (2006c). Phone interview with an IMF researcher (name withheld for confidentiality) on April 28, 2006.

IMF Staff. (2001). IMF lending to poor countries—How does the PRGF differ from the ESAF? Washington, D.C.: International Monetary Fund. Accessed on August 7, 2009. http://www.imf.org/external/np/exr/ib/2001/043001.htm

International Monetary Fund. several years. Direction of Trade Statistics Yearbook. Washington, D.C.: International Monetary Fund.

James, H. (1996). International monetary cooperation since Bretton Woods. New York: Oxford University Press.

Jensen, N. M. (2003). Democratic governance and multinational corporations: political regimes and inflows of foreign direct investment. International Organization, 57, 587–616.CrossRef

Jensen, N. M. (2004). Crisis, conditions, and capital: the effects of International Monetary Fund agreements on foreign direct investment flows. Journal of Conflict Resolution, 48, 194–210.CrossRef

Jensen, N. M. (2006). Nation-States and the multinational corporations: A political economy of foreign direct investment. Princeton: Princeton University Press.

Joyce, J. P., & Sandler, T. (2008). IMF retrospective and prospective: a publicgoods viewpoint. Review of International Organizations, 3(3), 221–238.CrossRef

Kahler, M. (1990). The United States and the International Monetary Fund. In M. P. Karns & K. A. Mingst (Eds.), The United States and multilateral institutions. Boston: Unwin Hyman.

Killick, T. (1995). IMF programmes in developing countries. London: Routlege Kegan Paul.CrossRef

Krueger, A. O. (1997). Whither the World Bank and the IMF? NBER Working Paper No. W6327. http://ssrn.com/abstract=226081

Li, Q. (2006). Democracy, autocracy, and tax incentives to Foreign Direct Investors: a cross-national analysis. Journal of Politics, 68, 62–74.

Li, Q., & Resnick, A. (2003). Reversal of fortunes: democratic institutions and foreign direct investment inflows to developing countries. International Organization, 57, 175–211.CrossRef

Loungani, P., and Razin, A. (2001). How beneficial is foreign direct investment for developing countries? Finance & Development: A Quarterly Magazine of the IMF 38(2).

Maddala, G. S. (1983). Limited-dependent and qualitative variables in economics. New York: Cambridge University Press.

Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61, 631–652.CrossRef

Mahon, J. E., Jr. (2004). Causes of tax reform in Latin America, 1977–95. Latin American Research Review, 39, 3–30.CrossRef

Marshall, M. (2002). Measuring the societal impact of war. In F. O. Hampson & D. Malone (Eds.), From reaction to conflict prevention: Opportunities for the UN system. Boulder: Lynne Rienner.

Marshall, M. G., & Jaggers, K. (2006). Polity IV Project: Political regime characteristics and transitions, 1800–2004. College Park: University of Maryland. Available from <http://www.cidcm.umd.edu/inscr/polity/>

Mayer, W., & Mourmouras, A. (2008). IMF conditionality: an approach based on the theory of special interest politics. Review of International Organizations, 3(2), 105–121.CrossRef

McKeown, T. J. (2009). How U.S. decision-makers assessed their control of multilateral organizations, 1957–1982. Review of International Organizations. 4(3), 269–291.

Mody, A., & Saravia, D. (2003). Catalysing capital flows: do IMF programs work as commitment devices? IMF Working Papers 03/100.

Mourmouras, A., & Rangazas, P. (2004). Conditional lending under altruism. Washington, D.C.: International Monetary Fund Working Paper WP/04/100.

Mussa, M. (2002). Argentina and the fund: From triumph to tragedy. Washington, D.C.: Institute for International Economics.

Nsouli, S. M., Atoyan, R., & Mourmouras, A. (2004). Institutions, program implementation, and macroeconomic performance. Washington, D.C.: International Monetary Fund Working Paper WP/04/184.

Oneal, J. (1994). The affinity of Foreign Investors for Authoritarian Regimes. Political Research Quarterly, 47, 565–589.

Przeworski, A., & Vreeland, J. (2000). The effect of IMF programs on economic growth. Journal of Development Economics, 62, 385–421.CrossRef

Rodrik, D. (1996). Understanding economic policy reform. Journal of Economic Literature, 34, 9–41.

Rodrik, D. (2006). Goodbye Washington Consensus, Hello Washington Confusion? Accessed at: http://ksghome.harvard.edu/~drodrik/Lessons%20of%20the%201990s%20review%20_JEL_.pdf

Rosecrance, R., & Thompson, P. (2003). Trade, foreign investment and security. Annual Review of Political Science, 6, 377–398.CrossRef

Sachs, J. (1998). The IMF and the Asian flu. The American Prospect, 37, 16–21.

Sargan, J. D. (1958). The estimation of economic relationships using instrumental variables. Econometrica, 26, 393–411.CrossRef

Smith, P. H. (2000). Talons of the eagle: Dynamics of U.S. Latin American relations (2nd ed.). Oxford: Oxford University Press.

Southard, F. (1979). The evolution of the International Monetary Fund. Essays in international fund. Princeton: International Finance Section, Department of Economics, Princeton University.

Staiger, D., & Stock, J. (1997). Instrumental variables regression with weak instruments. Econometrica, 65(3), 557–586.CrossRef

StataCorp. (2009). Stata 11 Help for Treatreg. http://www.stata.com/help.cgi?treatreg

Steinwand, M. C., & Stone, R. W. (2008). The International Monetary Fund: a review of the recent evidence. Review of International Organizations, 3(2), 123–149.CrossRef

Stiglitz, J. E. (2002). Globalization and its discontents. New York: Norton.

Stone, R. W. (2002). Lending credibility: The International Monetary Fund and the post-communist transition. Princeton: Princeton University Press.

Stone, R. W. (2004). The political economy of IMF lending in Africa. American Political Science Review, 98(4), 577–592.CrossRef

Thacker, S. (1999). The high politics of IMF lending. World Politics, 52, 38–74.

Vreeland, J. R. (2003a). The IMF and economic development. Cambridge: Cambridge University Press.CrossRef

Vreeland, J. R. (2003b). Why do governments and the IMF enter into agreements? Statistically selected cases. International Political Science Review, 24(3), 321–343.CrossRef

Vreeland, J. R. (2006). IMF program compliance: aggregate index versus policy specific research strategies. Review of International Organizations, 1, 359–378.CrossRef

World Bank. (2004). World Development Indicators. Washington, D.C.

Titel: The effects of IMF programs on U.S. foreign direct investment in the developing world
verfasst von: Glen Biglaiser
Karl DeRouen Jr
Publikationsdatum: 01.03.2010
Verlag: Springer US
Erschienen in: The Review of International Organizations / Ausgabe 1/2010
Print ISSN: 1559-7431
Elektronische ISSN: 1559-744X
DOI: https://doi.org/10.1007/s11558-009-9071-8

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 1/2010

Emilie M. Hafner-Burton. 2009. Forced to be Good: Why Trade Agreements Boost Human Rights, (Ithaca, Cornell University Press)

The political economy of exchange rate regimes in transition economies

Assessing the implementation of the IMF’s 2007 surveillance decision

Jean Pisani-Ferry and Adam S. Posen. 2009. The Euro at Ten: The next global currency? (Washington D.C.: Peterson Institute for International Economics, Bruegel)

Interactions among intergovernmental organizations in the anti-corruption realm