The article explores how International Monetary Fund (IMF) program design influences foreign direct investment inflows. The author argues that stricter IMF conditionality signals a program-participating government's commitment to economic reforms, as it incurs larger ex ante political cost and risks greater ex post political cost. Thus, the catalytic effect of an IMF program is conditional on conditionality: programs with stricter conditions catalyze more foreign direct investment than those with less stringent conditions. Empirical analysis of the IMF conditionality dataset supports the argument and shows that after accounting for IMF program participation, the more structural conditions included in an IMF program, the more foreign direct investment flows into the country.
Bibliographical noteFunding Information:
The research is funded in part by the University Faculty Research Fellowship from Oakland University. Previous versions of the paper were presented at the 2011 Midwest Political Science Association’s National Conference and at the 2011 American Political Science Association’s Annual Conference. The author thanks the editors, three anonymous reviewers, Mark Copelovitch, Ruth Ben-Artzi, and conference participants for insightful comments. The author is responsible for remaining errors. Replication materials are available at http:// dvn.iq.harvard.edu/dv/internationalinteractions.
All Science Journal Classification (ASJC) codes
- Political Science and International Relations