The IMF at a Crossroads
PLSC 398, PLSC 783, EP&E 457
Fall 2006
James Raymond Vreeland



Students visiting this page for the first time should read through the entire syllabus: the course description, the course requirements, the reading and the course outline. Beyond this initial reading, this web-based syllabus is designed to be used throughout the semester. Below you will find links to the assignments for each class session. Where possible, reading assignments have been linked to electronic versions available on the Internet. Other readings can be found under the "Materials" section of the Yale "classes" server. You will also find many other useful items on the Yale classes server, such as class notes and data. If you have any questions or comments about the web page or the course, please contact me.

[ Course description ]   [ Requirements ]   [ Reading ]   [ Course Outline ]   [ Contact Instructor ]

Important Dates:
October 10: Paper outline due
December 8: Final paper due


1. Introduction 9/12
2. What is the IMF? 9/19
3. Who controls the IMF? 9/26
4. Why do governments and the IMF enter into agreements? 10/3
5. What are the economic effects of IMF programs? 10/10
6. Which countries comply with IMF agreements? 10/17
7. Social issues: What are the effects of IMF programs on income distribution and the environment? 10/24
8. Doing research on the IMF: How to choose case studies 10/31
9. How do we evaluate the effects of IMF programs? 11/7
10. Should the IMF be reformed? 11/14
11. Why do IMF programs have the effects they do? 11/28
12. Presentations of student research 12/5
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Course description
The International Monetary Fund is at a crossroads. Originally intended to provide exchange rate stability, the IMF has gradually become involved in the economic policies of most countries in the world. Continued scrutiny of the institution reveals, however, that IMF policy advice appears to have failed in many respects. While the IMF has always had its critics, these days calls for its reform and even its dissolution come from across the political spectrum.

In this course we will study the purposes of the Fund, the effects of its economic programs, and the various reform arguments.

Research Agenda: This is a research-oriented seminar. The first week of class will be front-loaded with a lot of background on the history and purposes of the IMF. Subsequently, we will engage in original research on the Fund. Students will be expected to be researching their own questions and may want to bring up some of their results in class over the course of the semester. We want to encourage a workshop atmosphere. Students will make formal presentations of their own research and also be expected to read, comment on and contribute to the research of their colleagues in the class. Students who are not interested in doing research and are looking for a course that feeds them answers instead of questions should look elsewhere.

We will address questions on the research frontier of the IMF. Examples of research questions include:


We will approach our research questions from different perspectives: (1) theory (2) large-n empirical work (3) case study empirical work.

– Students who have had any exposure to game theory or formal modeling are encouraged to try their hand at formal approaches to research questions regarding the IMF.

– Students who have any statistical training are encouraged to do large-n empirical work. IMF participation data on all countries from 1951 to 2000 are available to the class. FOLLOW THIS LINK.

– Students who prefer case study work should choose their cases analytically by considering different “types” of cases that a question identifies. Once the “type” of case is identified, the student can refer to the data to learn which country exemplifies the “type” the student wishes to explore.

Students interested in a particular country or region should also reference the larger database to gain an understanding of where the particular case lies in the broader distribution of cases. Such students should use the data set to identify other cases similar to the one that interests them, as well as counterfactual cases.

Groups of students interested in the same research question may work together. (This is not required.)
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Requirements
    · Outline of research project (mid-term grade) (20%). Due October 10, 2006.

· Presentation (may be done in groups if research is collaborative) (10%). Schedule TBA.

· Participation. Students are expected to participate in discussions every week. To facilitate discussion, students should PREPARE ONE PARAGRAPH ON THE READINGS EACH WEEK TO HAND IN AT THE END OF CLASS. It should also be noted that quality class participation includes a certain quantity of speech, but lots of uninformed quantity does not equal any quality. Further note that students who fail to attend class or who sit in class  intellectually disengaged inhibit the intellectual progress of the class room as a community. Therefore, one’s class participation grade will include not only completing the readings on time and attending each class, but also active intellectual engagement in the class. As the semester progresses, students are expected to share the findings of their research with one another and read drafts of one another’s papers. (Students may, with instructor-approval, co-author work.) (20%).

· Research paper due at end of semester (50%). Due December 8, 2006.
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Reading
Given the participation requirement, it is important that students read before each seminar meeting. For each week, there is required reading (many of the required readings are available on-line - where possible, I have provided links). For most weeks, there is also “Background” reading. This is not required reading but may be useful for students who do further research on the given topic. If you have difficulty finding background readings, contact me.

The following books are available for purchase at Book Haven:

REQUIRED:
McQuillan, Lawrence J., and Peter C. Montgomery. 1999. The International Monetary Fund, Financial Medic to the World? A Primer on Mission, Operations, and Public Policy Issues. Stanford: Hoover Institution Press.
Price: $20

Stone, Randall W. 2002. Lending Credibility: The International Monetary Fund and the Post-Communist Transition. Princeton: Princeton University Press.
Price: $23

Vreeland, James. 2003. The IMF and Economic Development. New York: Cambridge University Press.
Price: $22

Recommended books to buy:
Bird, Graham. 1995. IMF Lending to Developing Countries, Issues and Evidence. London: Routledge.

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

Polak, J. J. 1991. The Changing Nature of IMF Conditionality. Princeton: International Finance Section, Department of Economics, Princeton University.

Ranis, Gustav, James Raymond Vreeland, and Stephen Kosack (eds.). 2006. Globalization and the Nation State: The Impact of the IMF and the World Bank. New York: Routledge.

Bordo, Michael D. and Barry Eichengreen (eds.). 1993. A Retrospective on the Bretton Woods System. Chicago: University of Chicago Press.
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Course Outline
1. Introduction (9/12/06)
Today I will lecture to provide students with a common background on the IMF. If you miss this class, you can download the PowerPoint lecture from the class server under "Materials" (the file name is "IMFgenericintro.ppt"). Subsequent class meetings will follow a seminar format.

5 THINGS TO DO THE FIRST WEEK:
(1) Read the online course syllabus

(2) Explore the International Financial Institutions Research Site. This is an AMAZING research tool!

(3) Read Willett, Thomas. 2001. "Understanding the IMF Debate." Independent Review 5 (4): 593-610.

(4) SIGN-UP for IMF news releases at:
http://www.imf.org/external/cntpst/membersignup.asp

(5) Start thinking about a research question today!
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2. What is the IMF? (9/19/06)
You should come to this class session with questions. Indeed, after today’s class I will assume that you know pretty much everything about the descriptive characteristics of the IMF, so don’t be bashful asking questions about anything that is unclear today. This week we will also have a preliminary roundtable discussion about your ideas for a research question. In this week's writing assignment, be sure to include a brief discussion of research questions you are considering.

READ:
McQuillan, Lawrence J., and Peter C. Montgomery. 1999. The International Monetary Fund, Financial Medic to the World? A Primer on Mission, Operations, and Public Policy Issues. Parts 1-3, & 5  (pp1-90, 159-192).
Available at bookstore.

The Articles of Agreement, entire (skim).
Available on-line: http://www.imf.org/external/pubs/ft/aa/index.htm

“About the IMF”
Available on-line: http://www.imf.org/external/about.htm

CHAPTER 1 OF The International Monetary Fund: Politics of Conditional Lending. 2007. New York: Routledge.
AVAILABLE ON THE CLASSES SERVER

Background reading:
de Vries, M. 1986. The IMF in a Changing World: 1945-1985. Washington, DC: IMF.
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3. Who controls the IMF? (9/26/06)
Influence at the IMF is supposed to be pegged to the size of a country’s quota. But officials claim that voting is rare at the Fund. Rather, the Fund operates by consensus. Many believe that this “consensus” is dominated by the United States.

READ:

CHAPTER 2 OF The International Monetary Fund: Politics of Conditional Lending. 2007. New York: Routledge.
AVAILABLE ON THE CLASSES SERVER

Gould, Erica. 2003. “Money Talks: Supplementary Financiers and International Monetary Fund Conditionality.” International Organization 57 (3): 551-586.
Available online.

Thacker, Strom. 1999. The High Politics of IMF Lending. World Politics 52: 38-75.
Available on-line

Oatley, Thomas and Jason Yackee. 2004. American Interests and IMF Lending. International Politics 41 no. 3: 415-429.
Available on-line.

Vaubel, Roland. 1996. "Bureaucracy at the IMF and the World Bank: A Comparison of the Evidence." World Economy 19 (2): 195-210.
Available online.

Dreher, Axel, James Raymond Vreeland and Jan-Egbert Sturm. 2006. Does membership on the UN Security Council influence IMF decisions? Evidence from panel data. ETH Zurich, May 2006.
AVAILABLE ON THE CLASSES SERVER

Background reading:

Dahl, Robert. 1999. Can International organizations be democratic? A skeptic's view. In Democracy's Edges, edited by Ian Shapiro and Casiano Hacker-Cordon, pp. 19-36. New York: Cambridge University Press.

Macho-Stadler, Ines, and David Perez-Castrillo. 1997. An Introduction to the Economics of Information. Oxford: Oxford University Press.

Vaubel, Roland. 1986. A Public Choice Approach to International Organization. Public Choice 51: 39-57.

Vaubel, Roland. 1991. “Problems at the IMF.” Swiss Review of World Affairs 40: 20-22.
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4. Why do governments and the IMF enter into agreements? (10/3/06)
Conventionally, we believe that governments turn to the IMF for a loan when they face a severe economic crisis and accept IMF conditions because they have no choice. Certain domestic political institutions, however, may lead a government to turn to the IMF because they want conditions to be imposed.

READ:
Vreeland, James. 2001. “The institutional determinants of IMF programs.” Ms.
Available online.

Drazen, Allen. 2002. “Conditionality and Ownership in IMF Lending: A Political Economy Approach.” IMF Staff Papers 49: 36-67.

Knight, Malcolm and Julio A. Santaella. 1997. “Economic Determinants of Fund Financial Arrangements.” Journal of Development Economics 54: 405-36.
Available online.

Dreher, Axel. 2004. " The Influence of IMF Programs on the Re-election of Debtor Governments." Economics & Politics 16 (1): 53-76.

CHAPTER 3 OF The International Monetary Fund: Politics of Conditional Lending. 2007. New York: Routledge.
AVAILABLE ON THE CLASSES SERVER

Background reading:
Putnam, Robert D. 1988. Diplomacy and Domestic Politics: the Logic of Two-Level Games. International Organization 42: 427-60.

Schelling, Thomas C. 1960. The Strategy of Conflict. Cambridge: Harvard University Press.

Tsebelis, George. 1995. “Decision Making in Political Systems.” British Journal of Political Science 25: 289-326.

Tsebelis, George. 2002. Veto Players: How Political Institutions Work. Princeton: Princeton University Press.
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5. What are the economic effects of IMF programs? (10/10/06)
Last week, we studied why countries enter into IMF programs. This is an intrinsically important question. It is also, however, important for us to be able to answer questions about the effects of IMF programs.

REMEMBER: PAPER OUTLINES ARE DUE TODAY!

READ:

Dreher, Axel. 2004. IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality. Ms.
Available under “Materials” on the class server.

Brune, Nancy, Geoffrey Garrett and Bruce Kogut. 2004. “The International Monetary Fund and the Global Spread of Globalization.” IMF Staff Papers 51 (2).
Available online.

Conway, Patrick. 1994. IMF Lending Programs: Participation and Impact. Journal of Development Economics 45: 365-91.
Available online.

Barro, Robert J. and Jong-Wha Lee. 2002. IMF Programs: Who Is Chosen and What are the Effects? Ms.
Available under “Materials” on Class Server.

Bird, Graham. 1996a. “The International Monetary Fund and Developing Countries: A Review of the Evidence and Policy Options.” International Organization 50: 477-511.
Available online.

Bird, Graham. 1996b. “Borrowing from the IMF: The Policy Implications of Recent Empirical Research.” World Development 24: 1753-60.
Available online.

Dicks-Mireaux, Louis, Mauro Mecagni and Susan Schadler. 2000. "Evaluating the Effect of IMF Lending to Low-Income Countries." Journal of Development Economics 61 (2): 495-526.
Available online.

CHAPTER 4 OF The International Monetary Fund: Politics of Conditional Lending. 2007. New York: Routledge.
AVAILABLE ON THE CLASSES SERVER

Background:

Przeworski, Adam and James Vreeland. 2000. “The Effect of IMF Programs on Economic Growth.” Journal of Development Economics 62: 385-421.
Available online.

Bird, Graham. 1995. IMF Lending to Developing Countries, Issues and Evidence. London: Routledge.

Khan, Mohsin S. 1990. “The Macroeconomic Effects of Fund-Supported Adjustment Programs.” IMF Staff Papers 37: 195-234.

Killick, Tony. 1995. IMF Programs in Developing Countries: Design and Impact. London: Routledge.
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6. Which countries comply with IMF agreements? (10/17/06)
Last week we learned about the selection problem. One can conceive of failing to account for nonrandom selection as a problem of omitted variable bias. Stone proposes that another form of omitted variable bias results from ignoring which countries are punished for noncompliance and which countries are not.

READ:
Stone, Randall W. 2002. Lending Credibility: The International Monetary Fund and the Post-Communist Transition. Princeton: Princeton University Press.
Available at the bookstore.

Simmons, Beth A. 2000. The Legalization of International Monetary Affairs. International Organization 54: 573-602.
Available online.

Aylward, Lynn and Rupert Thorne. 1998. "Countries' Repayment Performance Vis-á-vis the IMF." IMF Staff Papers 45 (4): 595-619.
Available under “Materials” on Class Server.

Dreher, Axel. 2002. "The Development and Implementation of IMF and World Bank Conditionality." Hamburg Institute of International Economics Discussion Paper no. 165

CHAPTER 5 OF The International Monetary Fund: Politics of Conditional Lending. 2007. New York: Routledge.
AVAILABLE ON THE CLASSES SERVER

Background:
Mercer-Blackman and Unigovskaya. 2000. “Compliance with IMF Indicators and Growth in Transition Economies.” Ms.
Available under “Materials” on Class Server.

Schadler, Susan et al. 1995. “IMF Conditionality: Experiences Under Stand-By and Extended Arrangements, Part I: Key Issues and Findings.” Occasional Paper 128. Washington: International Monetary Fund.

Schadler, Susan (ed.). 1995. “IMF Conditionality: Experiences Under Stand-By and Extended Arrangements, Part II: Background Papers.” Occasional Paper 129. Washington: International Monetary Fund.

Schadler, Susan. 1996. “How Successful are IMF Supported Adjustment Programs?” Finance and Development 33: 14-17.
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7. Social issues: What are the effects of IMF programs on income distribution and the environment? (10/24/06)
Many students are interested in these questions, and thus you may be doing your research projects on them. If so, you may want to take advantage of this class session to present some of your preliminary findings to the class, and also pose some of the tough questions you're facing with your research to see if any of your colleagues have suggestions. Contact me if you have materials to distribute to the class. As your research progresses throughout the semester, let me know if you have something you would like to present to the class, even if it is off-topic for that week.

READ:
Garuda, Gopal. 2000. The Distributional Effects of IMF Programs: A Cross-Country Analysis. World Development 28: 1031-51.
Available online.

Vreeland, James. 2003. The IMF and Economic Development. New York: Cambridge University Press. CHAPTER 6.
Available at the bookstore.

Vreeland, James, Robynn Kimberly Sturm and Spencer William Durbin. 2001. The Effect of IMF Programs on Deforestation. Ms.
Available online.

Background:
Pastor, Manuel. 1987a. The International Monetary Fund and Latin America: Economic Stabilization and Class Conflict. Boulder: Westview Press.

Pastor, Manuel. 1987b. The Effects of IMF Programs in the Third World: Debate and Evidence from Latin America. World Development 15: 365-91.
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8. Doing research on the IMF: How to choose case studies (10/31/06)
This week we will explore one method of doing further research on the questions we have covered. It is intended to help those of you doing case studies for your research projects to think analytically about how to choose cases. You should come to this class armed with: (1) Your research question / your dependent variable / the thing you want to explain. (2) At least one hypothesis / your answer / explanatory variables.

READ:
Vreeland, James. 2003. The IMF and Economic Development. New York: Cambridge University Press. CHAPTER 2.
Available at the bookstore.

Background:
Huber, John D. 1996. Rationalizing Parliament: Legislative Institutions and Party Politics in France. Cambridge: Cambridge University Press. CHAPTER 6.

King, Gary, Robert O. Keohane, and Sidney Verba. 1994. Designing Social Inquiry: Scientific Inference in Qualitative Research. Princeton: Princeton University Press.

Przeworski, Adam and Henry Teune. 1982. The Logic of Comparative Inquiry. Malebar, Florida: Krieger Publishing.
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9. How do we evaluate the effects of IMF programs? (11/7/06)
This week we return to the question of how to evaluate the effects of IMF programs in the computer lab setting. We will be employing the class dataset and trying our hand at sophisticated statistical approaches.

READ:
Vreeland, James. 2003. The IMF and Economic Development. New York: Cambridge University Press. CHAPTER 5.
Available at the bookstore.

Background:
Goldstein, Morris and Peter J. Montiel. 1986. “Evaluating Fund Stabilization Programs with Multicountry Data: Some Methodological Pitfalls.” IMF Staff Papers 33: 304-344.

Achen, Christopher H. 1986. The Statistical Analysis of Quasi-Experiments. Berkeley: University of California Press.

Heckman, James J. 1979. “Sample Selection Bias as a Specification Error.” Econometrica 47: 153-161.
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10. Should the IMF be reformed? (11/14/06)
Now that we are all experts on the IMF, let’s discuss how the institution can be improved.

READ:
McQuillan, Lawrence J., and Peter C. Montgomery. 1999. The International Monetary Fund, Financial Medic to the World? A Primer on Mission, Operations, and Public Policy Issues. Part 6. pp193-229.
Available at the bookstore.

The Meltzer Commission Report.
Available under “Materials” on Class Server.

Woods, Ngaire. 2000. "The Challenge of Good Governance for the IMF and the World Bank Themselves." World Development 28 (5): 823-841.

CHAPTERS 6 & 7 OF The International Monetary Fund: Politics of Conditional Lending. 2007. New York: Routledge.
AVAILABLE ON THE CLASSES SERVER

Background:
Tobin, James. 1998. “Financial Globalization: Can National Currencies Survive?” In Boris Pleskovic and Joseph E. Stiglitz (eds.): Annual World Bank Conference on Development Economics 1998. Washington, DC: The World Bank.

Fischer, Stanley. 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 1999. Available at www.imf.org.
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11. Why do IMF programs have the effects they do? (11/28/06)

READ:
Easterly, William. 2002. “An Identity Crises? Testing IMF Financial Programming.” Center for Global development Working Paper No. 9.

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Suggested:
Kim, Jun Il. 2006. IMF-Supported Programs and Crisis Prevention: An Analytical Framework. WP/06/156.

12. Presentations of student research (12/5/06)

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Professor Vreeland's Contact Information:

James Raymond Vreeland
Associate Professor, Department of Political Science
email: james.vreeland@yale.edu
web: http://www9.georgetown.edu/faculty/jrv24/
tel: 203-432-6220

Office location: 124 Prospect Street (Brewster Hall) - Room 305. For directions, use this link.

Office hours: Tuesdays 10am-12pm *By appointment only - see the sign up sheet on my office door*

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