Leverage, power, and IMF conditionality: A strategic bargaining model of conditionality agreements between the IMF and developing countries

This dissertation analyzes the dynamics at work in negotiations for structural adjustment lending to developing countries from multilateral donor agencies such as the International Monetary Fund (IMF), dynamics which can account for the difference in conditionality agreements. The disappointing results associated with structural adjustment are more often than not identified with the onerous inflexibility of conditions imposed on developing countries by the IMF, with little consideration for differences in types of economies and level of development. I, however, find that the terms of policy reform varied significantly in content, scope, and timing country by country.; In order to explain such variance, conditionality agreements are modeled as outcomes of strategic bargaining between the IMF and developing countries, whereby the relative bargaining strength of each player determines the nature and variance in outcomes. The relative bargaining strength denotes leverage within a specific issue area, as distinguished from the conventional notion of aggregate structural power in international relations. Strategic interaction between the two players was constructed with a game model, which illustrates that bargaining leverage is a necessary condition for the differences in conditionality agreements.; Subsequent statistical analyses concentrated on measuring the effect of leverage relevant to the issue area of conditionality bargaining, using the number of agreed conditions extracted from IMF Survey as dependent variable, and supported the theoretical results of the game model. A case study of conditionality bargaining between the Republic of Korea and the IMF also showed that some exceptional conditions in its conditionality agreement, such as radical liberalization of financial market, were by and large a result of failure to mobilize effective leverage to the negotiation with the RAF.; The above findings suggest that there are major distinctions in the instruments, issues, and interests that developing countries could bring to their relationship with the IMF. The findings also suggest that the sophisticated and symbiotic interplay of interdependence between the IMF and recipient countries was not properly appraised in past scholarly works. The results of structural adjustment seem to be influenced by the choice of conditions through bargaining as much as they are by domestic implementation. Studies of structural adjustment should be reorganized so as to incorporate the consequences of politics at the negotiation stage. That is, without a clear idea of how the terms of conditionality were drawn and what the source of the variance in conditionality terms was, a diagnosis of where the conditionality implementation went awry is not reliable, and much less is a search for cure for that malady. Conditionality agreements have been plagued by political rationality from the beginning. Therefore, what is needed for better results from structural adjustment is an improvement in politics at the bargaining stage in order to bring their interests gradually closer together under the shadow of future.