Are IMF Programs Really Bad for Democracy?

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Are the lending programs of the International Monetary Fund bad for democracy? The conventional wisdom is that the implementation of IMF conditional lending programs triggers cycles of austerity, social protest, and government repression that result in democratic backsliding. We present evidence which suggests that the conventional wisdom is wrong. We use a statistical procedure – matching – to handle a major threat to inference about the direction and size of the effect of IMF programs on the level of democracy in borrowing countries: the non-random assignment of the “treatment” (IMF conditional lending arrangements) to cases. By pairing treatment and control cases that are very similar, we are able to generate more credible estimates of the impact of the IMF on democracy. Our results are surprising: IMF programs are associated with increases in the level of democracy. We find that the impact of the IMF is additive: countries that spend more time under the IMF lending programs experience big improvements in the level of democracy.

Last modified
  • 01/03/2019
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  • 11-004
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