Explaining IMF Loan Conditionality: A Strategic Interaction Approach

What explains the substantial variation in the conditionality of loans provided by the Inter- national Monetary Fund (IMF)? In this paper, we reassess the empirical findings of a significant recent contribution to this debate, Caraway, Rickard, and Anner’s article “International Nego- tiations and Domestic Politics: The Case of IMF Labor Market Conditionality” (International Organization, Winter 2012). We find that their model fails to deal appropriately with missing observations in their data set, with the consequence that it applies only to a small subset of relatively rich and democratic borrowers. To address this problem, we re-estimate the model using imputed data. Our results offer little support for their theory of IMF loan conditionality. Instead, we outline an alternative theoretical framework - fully consistent with our results - that conceptualizes conditionality as the outcome of a strategic interaction between borrowers and lenders within the organization.