Skip to main content
SpringerLink
Log in

Institutional Determinants: A Case Study of IMF Programme and Non-programme Countries

  • Chapter
The Political Economy of Governance

Part of the book series: Studies in Political Economy ((POEC))

  • 930 Accesses

Abstract

The current study attempts to explore significant determinants of institutional quality—economic and political—in the case of non-programme and programme countries. The period of analysis is 1980–2009, as the activity of IMF increased during this time. Results primarily indicate that the military in power significantly reduces institutional quality, while improvement in property rights, openness, aggregate governance and real GDP growth all remain highly important in improving institutional quality, while enhancement in monetary and investment freedom also help and hence need to be focused upon by IMF programmes.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Complete list at: https://www.imf.org/external/np/sec/memdir/memdate.htm.

  2. 2.

    Prolonged users are those countries that have been in an IMF programme for 7 or more years in a 10-year time period (Independent Evaluation Office 2002, pp. 9 and 24).

  3. 3.

    The author, following the definition of prolonged users by IEO, defines non-prolonged users as those IMF member countries who during a 10-year time period remained under an IMF programme, but for less than 7 years.

  4. 4.

    The author classifies IMF member countries that have not been in an IMF programme during 1980–2009 as nonprogramme countries.

  5. 5.

    Costs involved included (among others) costs associated with collecting and analysing information and also for enforcement (Dahlman 1979, p. 148).

  6. 6.

    These are costs associated with transactions due to underlying information asymmetries, and the fact that individuals have varied perceptions about the working of the world, institutions reduces such costs (Harriss et al. 1995; North 1994, p. 17).

  7. 7.

    Eggertsson (1996, p. 7) indicates that in Institutional Economics, property rights meant the right of actors (in an economy) to employ or use their assets (Alchian 1965).

  8. 8.

    An inclusive institution creates an environment, which adopts participatory approach and enhances inclusion by improving upon institutional determinants like protection of property rights. Institutions, on the other hand, work in an extractive way by creating an environment that results in resource transfer from one to another group. Also, either of the two environments is an outcome of collusion between the political and economic institutions (Acemoglu and Robinson 2012, pp. 74–82).

  9. 9.

    Traders reduce costs related to personal exchange privately (Williamson 1985), but state intervention is required to lower cost-related exchange that is impersonal in nature (Milgrom et al. 1990).

  10. 10.

    http://data.worldbank.org/data-catalog/worldwide-governance-indicators.

  11. 11.

    http://info.worldbank.org/governance/wgi/index.aspx\#home.

  12. 12.

    http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:20649465~pagePK:64214825~piPK:64214943~theSitePK:469382,00.html.

  13. 13.

    http://globalization.kof.ethz.ch/.

  14. 14.

    http://www.heritage.org/index/explore.

  15. 15.

    http://data.worldbank.org/data-catalog/world-development-indicators.

  16. 16.

    http://www.cato.org/economic-freedom-world.

  17. 17.

    http://www.systemicpeace.org/.

  18. 18.

    http://www.icpsr.umich.edu/icpsrweb/ICPSR/studies/9263?q=PolityIIandsearchSource=icpsr-landing.

  19. 19.

    While Arellano and Bover (1995) extended the original work by Arellano and Bond (1991); Blundell and Bond (1998) developed the original work further.

  20. 20.

    http://www.stata.com/.

  21. 21.

    For detailed insights on this, see Roodman (2007).

References

  • Abbott, P., Andersen, T. B., & Tarp, F. (2010). IMF and economic reform in developing countries. The Quarterly Review of Economics and Finance, 50, 17–26.

    Article  Google Scholar 

  • Acemoglu, D. (2006). A simple model of inefficient institutions. Scandinavian Journal of Economics, 108, 515–546.

    Article  Google Scholar 

  • Acemoglu, D., & Johnson, S. (2005). Unbundling institutions. Journal of Political Economy, 113, 949–995.

    Article  Google Scholar 

  • Acemoglu, D., & Robinson, J. A. (2008). Persistence of power, elites, and institutions. American Economic Review, 98, 267–293.

    Article  Google Scholar 

  • Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty (1st ed.). New York: Crown Business.

    Google Scholar 

  • Afonso, A., & Jalles, J. T. (2011). Economic performance and government size. ECB Working Paper Series No. 1399, ECB, Germany.

    Google Scholar 

  • Alchian, A. A. (1965). Some economics of property rights. Il Politico, 30, 816–829. Reprinted in Economic Forces at Work, A. A. Alchian (ed). (1977) Liberty Fund: Indianapolis; 127–149.

    Google Scholar 

  • Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58, 277–297.

    Article  Google Scholar 

  • Arellano, M., & Bover, O. (1995). Another look at instrumental variables estimation of error-component models. Journal of Econometrics, 68, 29–51.

    Article  Google Scholar 

  • Aron, J. (2000). Growth and institutions: A review of the evidence. The World Bank Research Observer, 15, 99–135.

    Article  Google Scholar 

  • Arpac, O., Bird, G., & Mandilaras, A. (2008). Stop interrupting: An empirical analysis of the implementation of IMF programs. World Development, 36, 1493–1513.

    Article  Google Scholar 

  • Barro, R. J., & Lee, J. (2005). IMF programmes: Who is chosen and what are the effects? Journal of Monetary Economics, 52, 1245–1269.

    Article  Google Scholar 

  • Bird, G. (2001). IMF programmes: Do they work? Can they be made to work better? World Development, 29, 1849–1865.

    Article  Google Scholar 

  • Bird, G. (2007). The IMF: A bird’s eye view of its role and operations. Journal of Economic Surveys, 21, 683–745.

    Article  Google Scholar 

  • Bird, G., & Willett, T. (2004). IMF conditionality, implementation and the new political economy of ownership. Comparative Economic Studies, 46, 423–450.

    Article  Google Scholar 

  • Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115–143.

    Article  Google Scholar 

  • Buira, A. (1983). IMF financial programs and conditionality. Journal of Development Economics, 12, 111–136.

    Article  Google Scholar 

  • Butkiewicz, J. L., & Yanikkaya, H. (2005). The effects of IMF and World Bank lending on long-run economic growth: An empirical analysis. World Development, 33, 371–391.

    Article  Google Scholar 

  • Coase, R. (1992). The institutional structure of production. The American Economic Review, 82, 713–719.

    Google Scholar 

  • Dahlman, C. J. (1979). The problem of externality. Journal of Law and Economics, 22, 141–162.

    Article  Google Scholar 

  • Easterly, W. (2002). The elusive quest for growth. Economists’ adventures and misadventures in the tropics (1st ed.). Cambridge: MIT Press.

    Google Scholar 

  • Eggertsson, T. (1996). A note on the economics of institutions. In L. J. Alston, T. Eggertsson, & D. C. North (Eds.), Empirical studies in institutional change (1st ed., pp. 6–24). Cambridge, UK: Cambridge University Press.

    Google Scholar 

  • Evrensel, A. Y. (2002). Effectiveness of IMF-supported stabilization programmes in developing countries. Journal of International Money and Finance, 21, 565–587.

    Article  Google Scholar 

  • Hall, R. E., & Jones, C. I. (1999). Why do some countries produce so much more output per worker than others. Quarterly Journal of Economics, 114, 83–116.

    Article  Google Scholar 

  • Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica, 50, 1029–1054.

    Article  Google Scholar 

  • Haque, N. ul., & Khan, M. S. (1998). Do IMF-supported programs work? A survey of the cross-country empirical evidence. IMF Working Paper No. 98-169, IMF, Washington, DC.

    Google Scholar 

  • Harriss, J., Hunter, J., & Lewis, C. M. (1995). The new institutional economics and third world (2nd ed.). London: Routledge.

    Google Scholar 

  • IMF. (2005). Building institutions. In World economic outlook, building institutions, world economic and financial surveys (pp. 125–60). Washington, DC: IMF.

    Google Scholar 

  • Independent Evaluation Office. (2002). Report on prolonged use of IMF resources. Washington, DC: IMF.

    Google Scholar 

  • Independent Evaluation Office. (2007). An IEO evaluation of structural conditionality in IMF-supported programs. Washington, DC: IMF.

    Google Scholar 

  • Joskow, P. L. (2008). Introduction to new institutional economics: A report card. In E. Brousseau & J.-M. Glachant (Eds.), New institutional economics: A guidebook (1st ed., pp. 1–19). Cambridge, UK: Cambridge University Press.

    Chapter  Google Scholar 

  • Joyce, J. P. (1992). The economic characteristics of IMF program countries. Economic Letters, 38, 237–242.

    Article  Google Scholar 

  • Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The worldwide governance indicators: Methodology and analytical issues. World Bank Policy Research Working Paper No. 5430, The World Bank, Washington, DC.

    Google Scholar 

  • Kuncic, A. (2014). Institutional quality dataset. Journal of Institutional Economics, 10, 135–161.

    Article  Google Scholar 

  • Lin, J. Y., & Nugent, J. B. (1995). Institutions and economic development. In J. Behrman & T. N. Srinivasan (Eds.), Handbook of development economics (2nd ed.). Amsterdam: North-Holland.

    Google Scholar 

  • Marshall, M. G., Jaggers, K., & Gurr, T. R. (2011). Polity IV Project: Dataset users’ manual. Arlington: Polity IV Project.

    Google Scholar 

  • Milgrom, P., North, D., & Weingast, B. (1990). The role of institutions in the revival of trade: The Medieval Law Merchant. Economics & Politics, 2, 1–23.

    Article  Google Scholar 

  • Mill, J. S. (1861). Considerations on representative government (1st ed.). London: Parker, Son, & Bourn. Retrieved 20 June 2014. Via Google Books.

    Google Scholar 

  • Myrdal, G. (1968). Asian drama: An inquiry into the poverty of nations (2nd ed.). London: Allen Lane, the Penguin Press.

    Google Scholar 

  • North, D. (1990). Institutions, institutional change, and economic performance (1st ed.). New York: Cambridge University Press.

    Book  Google Scholar 

  • North, D. (1994). Institutional change: A framework of analysis. St. Louis: Washington University. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=6041. Accessed 01 Nov 2013.

    Google Scholar 

  • Nsouli, S. M., Atoian, R., & Mourmouras, A. (2004). Institutions, program implementation, and macroeconomic performance. IMF Working Paper No. 04-184, IMF, Washington, DC.

    Google Scholar 

  • Rodrik, D. (2000). Institutions for high-quality growth: What they are and how to acquire them. NBER Working Paper No. 7540, NBER, Cambridge.

    Google Scholar 

  • Rodrik, D. (2007). Getting institutions right. In D. Rodrik (Ed.), One economics, many recipes: Globalization, institutions, and economic growth (pp. 184–192). New Jersey: Princeton University Press.

    Google Scholar 

  • Rodrik, D., Subramanian, A., & Trebbi, F. (2002). Institutions rule: The primacy of institutions over geography and integration in economic development. Centre for Economic Policy Research Discussion Paper Series No. 3643, Centre for Economic Policy Research, London.

    Google Scholar 

  • Roodman, D. (2007). A short note on the theme of too many instruments. Center for Global Development Working Paper No. 125, Center for Global Development, Washington, DC.

    Google Scholar 

  • Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9, 86–136.

    Google Scholar 

  • Shirley, M. M. (Ed.). (2008). Institutions and development. In C. Menard & M. M. Shirley (Eds.), Handbook of new institutional economics (1st ed., pp. 611–638). New York: Springer.

    Google Scholar 

  • Smith, A. (1976). In R. H. Campbell & A. S. Skinner (Eds.), An inquiry into the nature and causes of the wealth of nations (1st ed.). Oxford: Oxford University Press (Liberty Classics reprint, 1981). Originally: London (1776).

    Google Scholar 

  • Stiglitz, J. E. (2001). Failure of the fund: Rethinking the IMF response. Harvard International Review, 23, 14–18.

    Google Scholar 

  • Ugur, M. (2010). Institutions and economic performance: A review of the theory and evidence. MPRA Paper 25909, University Library of Munich, Munich. Available at http://mpra.ub.uni-muenchen.de/25909/. Accessed 10 Nov 2013.

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

    Article  Google Scholar 

  • Williamson, O. E. (1985). The economic institutions of capitalism (1st ed.). New York: Free Press.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Faculty of Economics and Business, University of Barcelona, Av. Diagonal, 690, 08034, Barcelona, Spain

    Omer Javed

Authors
  1. Omer Javed
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Omer Javed .

Editor information

Editors and Affiliations

  1. Department of Political Science, Washington University in Saint Louis, Saint Louis, Missouri, USA

    Norman Schofield

  2. Faculty of Economics, University of Vigo, Vigo, Spain

    Gonzalo Caballero

Rights and permissions

Reprints and permissions

Copyright information

© 2015 Springer International Publishing Switzerland

About this chapter

Cite this chapter

Javed, O. (2015). Institutional Determinants: A Case Study of IMF Programme and Non-programme Countries. In: Schofield, N., Caballero, G. (eds) The Political Economy of Governance. Studies in Political Economy. Springer, Cham. https://doi.org/10.1007/978-3-319-15551-7_7

Download citation

Publish with us

Policies and ethics

Search

Navigation