Skip to main content
    • Aa
    • Aa

Do IMF and World Bank Programs Induce Government Crises? An Empirical Analysis

  • Axel Dreher (a1) and Martin Gassebner (a2)

We examine whether and under what circumstances World Bank and International Monetary Fund (IMF) programs affect the likelihood of major government crises. We find that crises are, on average, more likely as a consequence of World Bank programs. We also find that governments face an increasing risk of entering a crisis when they remain under an IMF or World Bank arrangement once the economy's performance improves. The international financial institution's (IFI) scapegoat function thus seems to lose its value when the need for financial support is less urgent. While the probability of a crisis increases when a government turns to the IFIs, programs inherited by preceding governments do not affect the probability of a crisis. This is in line with two interpretations. First, the conclusion of IFI programs can signal the government's incompetence, and second, governments that inherit programs might be less likely to implement program conditions agreed to by their predecessors.

Linked references
Hide All

This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

Chunrong Ai , and Edward C. Norton . 2003. Interaction Terms in Logit and Probit Models. Economics Letters 80 (1):123–29.

Nathaniel Beck , Jonathan N. Katz , and Richard Tucker . 1998. Taking Time Seriously: Time-Series–Cross-Section Analysis with a Binary Dependent Variable. American Journal of Political Science 42 (4):1260–88.

Bernhard Boockmann , and Axel Dreher . 2003. The Contribution of the IMF and the World Bank to Economic Freedom. European Journal of Political Economy 19 (3):633–49.

Axel Dreher . 2004. The Influence of IMF Programs on the Re-election of Debtor Governments. Economics and Politics 16 (1):5376.

Axel Dreher , and Jan-Egbert Sturm . 2012. Do the IMF and the World Bank Influence Voting in the UN General Assembly? Public Choice 151 (1):363–97.

Axel Dreher , and Roland Vaubel . 2004. Do IMF and IBRD Cause Moral Hazard and Political Business Cycles? Evidence from Panel Data. Open Economies Review 15 (1):522.

William Greene . 2010. Testing Hypotheses About Interaction Terms in Nonlinear Models. Economics Letters 107 (2):291–96.

Christopher Kilby . 2009. The Political Economy of Conditionality: An Empirical Analysis of World Bank Loan Disbursements. Journal of Development Economics 89 (1):5161.

Christopher Kilby . 2011. Informal Influence in the Asian Development Bank. Review of International Organizations 6 (3-4):223–57.

Tony Killick . 1995. IMF Programmes in Developing Countries: Design and Impact. London: Routledge.

Silvia Marchesi , and Laura Sabani . 2007. IMF Concern for Reputation and Conditional Lending Failure: Theory and Empirics. Journal of Development Economics 84 (2):640–66.

Silvia Marchesi , Laura Sabani , and Axel Dreher . 2011. Read My Lips: The Role of Information Transmission in Multilateral Reform Design. Journal of International Economics 84 (1):8698.

Silvia Marchesi , and Emanuela Sirtori . 2011. Is Two Better than One? The Effects of IMF and World Bank Interaction on Growth. Review of International Organizations 6 (3-4):287306.

Christoph Moser , and Jan-Egbert Sturm . 2011. Explaining IMF Lending Decisions After the Cold War. Review of International Organizations 6 (3-4):307–40.

Thomas Sattler , and Stefanie Walter . 2010. Monetary Credibility vs. Voter Approval: Political Institutions and Exchange-Rate Stabilization During Crises. Economics and Politics 22 (3):392418.

Alastair Smith , and James Raymond Vreeland . 2006. The Survival of Political Leaders and IMF Programs. In Globalization and the Nation State: The Impact of the IMF and the World Bank, edited by Gustav Ranis , James Raymond Vreeland , and Stephen Kosack , 263–89. New York: Routledge.

Douglas Staiger , and James H. Stock . 1997. Instrumental Variables Regression with Weak Instruments. Econometrica 65 (3):557–86.

Martin C. Steinwand , and Randall W. Stone . 2008. The International Monetary Fund: A Review of the Recent Evidence. Review of International Organizations 3 (2):123–49.

James Raymond Vreeland . 2006. IMF Program Compliance: Aggregate Index Versus Policy Specific Research Strategies. Review of International Organizations 1 (4):359–78.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

International Organization
  • ISSN: 0020-8183
  • EISSN: 1531-5088
  • URL: /core/journals/international-organization
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
Type Description Title
Supplementary Materials

Dreher supplementary material 1
Dreher supplementary material 1

 Unknown (11 KB)
11 KB
Supplementary Materials

Dreher supplementary material 2
Dreher supplementary material 2

 Unknown (1.0 MB)
1.0 MB


Altmetric attention score

Full text views

Total number of HTML views: 13
Total number of PDF views: 172 *
Loading metrics...

Abstract views

Total abstract views: 528 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 23rd September 2017. This data will be updated every 24 hours.