The IMF at a Crossroads
PLSC 398b, PLSC 783b, EP&E 457b
Spring 2003
James Vreeland



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. Under the "Materials" section of the class server, you will find many useful items such as readings, class notes, and data. 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. 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:
March 3: Paper outline due
April 21: Final papers due


1. Introduction (1/13/03)
2. What is the IMF? (1/17/03)
3. Who controls the IMF? (1/27/03)
4. Why do governments and the IMF enter into agreements? (2/3/03)
5. What are the effects of IMF programs on economic growth and stability? (2/10/03)
6. Which countries comply with IMF agreements? (2/17/03)
7. Social issues: What are the effects of IMF programs on income distribution and the environment? (2/24/03)
8. Doing research on the IMF: How to choose case studies (3/3/03)
9. How do we evaluate the effects of IMF programs? (3/24/03)
10. Should the IMF be reformed? (3/31/03)
11. Presentations of student research OR The Question of "Ownership" (4/7/03)
12. Presentations of student research OR Reform from Within the IMF (4/14/03)
13. Presentations of student research (4/21/03)
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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. Since the East Asian financial crisis, however, the IMF has come under closer scrutiny than ever before. While the IMF has always had its critics, this is the first time 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 not questions should look elsewhere.

We will address frontier research questions on the IMF:


We will approach our research questions from 3 methodological perspectives: (1) formal 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. Data on 135 countries that have cumulatively participated in IMF agreements during 1,477 years will be available to the class. (And more data will become available over the course of the semester.)

– 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 must 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.

Ideally, groups of 3 students interested in the same research question will work together, attacking their research question from the 3 methodological approaches.
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Requirements
· Outline of research project (mid-term grade) (20%). Due March 3, 2003.

· Presentation (may be done in groups if research is collaborative) (20%). Schedule TBA.

· Students are encouraged to collaborate. (At minimum, students are expected to share their findings with one another and read drafts of one another’s papers. Students may, with instructor-approval, co-author work.) Students must also participate in seminar discussions. PLEASE PREPARE ONE PARAGRAPH ON THE READINGS EACH WEEK TO HAND IN AT THE END OF CLASS (20% = 2% each – see below).

· Research paper due at end of semester (40%). Due April 21, 2003.
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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 (or will be) available for purchase at the Yale University Bookstore:

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: $19.95 (http://www.barnesandnoble.com).

Stone, Randall W. 2002. Lending Credibility: The International Monetary Fund and the Post-Communist Transition. Princeton: Princeton University Press.
Price: 19.95 (http://www.barnesandnoble.com).

Vreeland, James. 2003. The IMF and Economic Development. New York: Cambridge University Press. (THIS ONE HAS A RELEASE DATE OF FEBRUARY.)
Price: $22.00 (http://www.barnesandnoble.com).

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.

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 (1/13/03)
Today I 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 rest of our class meetings will follow a seminar format.

READ:
Online course syllabus

Willett, Thomas D. 2000. “Understanding the IMF Debate.” Ms. prepared for The Independent Review: A Journal of Political Economy.
Available under “Materials” on Class Server

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

Start thinking about research questions right away!
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2. What is the IMF? (1/17/03)
This course is frontloaded with reading to get all of the students up to speed on the IMF. 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. You'll notice that future weeks have much less reading. This is because I expect you to be working on original research as the semester progresses.

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

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? (1/27/03)
Control of 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:
Thacker, Strom. 1999. The High Politics of IMF Lending. World Politics 52: 38-75.
Available on-line

Oatley, Thomas and Jason Yackee. 2000. Political Determinants of IMF Balance of Payments Lending. Unpublished manuscript, University of North Carolina at Chapel Hill.
Available under “Materials” on Class Server.

Vreeland, James. 2002. Pakistan’s Debt of Gratitude. Foreign Policy Magazine Mar-April: 72-3.
Available under “Materials” on Class 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? (2/3/03)
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.

Skim: Przeworski, Adam and James Vreeland. 2002. “A Statistical Model of Bilateral Cooperation.” Political Analysis 10.
Available under “Materials” on Class Server.

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

Edwards, Martin. 2001. “Sticking with Yes: Domestic Institutions and IMF Compliance.” Ms.
Available under “Materials” on Class 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 effects of IMF programs on economic growth and stability? (2/10/03)
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.

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

Background:
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? (2/17/03)
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.

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? (2/24/03)
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 (3/3/03)
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? (3/24/03)
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? (3/31/03)
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.

Vreeland, James. 2003. The IMF and Economic Development. New York: Cambridge University Press. CHAPTER 7.
Available at the bookstore.

The Meltzer Commission Report.
Available under “Materials” on Class 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. Presentations of student research OR The Question of "Ownership" (4/7/03)

Possible readings:
Boughton, James. 2003. Ownership and Conditionality in IMF-Supported Reform Programs. Ms.

Drazen, Allan. 2003. Conditionality and Ownership in IMF Lending: A Political Economy Approach. Ms.

Conway, Patrick. 2003. A Simple Model of Conditionality. Ms.
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12. Presentations of student research OR Reform from Within the IMF (4/14/03)

Possible readings:
Conway, Patrick, Marcelo Selowsky, and Tsidi Tsikata. 2003. An Explanation of Unrealistic IMF Staff Expectations. Ms.

Pauly, Louis. 2003. Institutional Adaptation within the IMF. Ms.
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13. Presentations of student research (4/21/03)
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Contact Instructor:
James Raymond Vreeland
Assistant Professor, Department of Political Science
DUS, International Studies Program
email: james.vreeland@yale.edu
web: http://www9.georgetown.edu/faculty/jrv24/
voice: 203-432-6220

Office hours: Monday mornings- *By appointment only*
Contact the International Affairs Council: kathy.sulkes@yale.edu
voice: 203-432-6253
Office location: Suite 210, Luce Hall, 34 Hillhouse Avenue
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