Stone, Randall W. (2002). Lending credibility : the International Monetary Fund and the post-communist transition. Princeton, N.J.: Princeton University Press.
Dependent variable: the effect of the institution to elicit control over a recipient country.
The question is whether or not international institutions have the ability to exert control over independent, sovereign countries. Other IR perspectives are concerned whether or not domestic interest groups and issues of distribution will blunt the influence of international institutions. Stone believes that both of these perspectives are partially correct (2).
He then embarks on a project of examining the counterfactual of whether or not IMF policies have had an independent effect on changing the policies of recipient countries. Firstly, he defines the, "effects that IMF intervention is expected to have" (3). Secondly, he advances a statistical methodology to examine to what degree IMF interventions effect policy change. He finds that, if the IMF can not show that they will be able to enforce policy, these policies will not be followed. Thirdly, he attempts to examine his statistical conclusions by looking at case-studies in
Stone then claims that inflation and GDP growth rates are highly correlated. "The significance of these results is that countries with higher inflation grew more slowly, or declined more rapidly, and attracted less foreign direct investment. Furthermore, it was the poor rather than the relatively wealthy who suffered most from inflation: high inflation caused income inequality to increased" and, "Taming inflation was the most urgent task facing post-Communist countries, because high levels of inflation threatened to derail all other aspects of their reform programs" (7).
Inflation is especially important for Post-Communist countries for the following reasons: inflation, "warps the incentives of firms, preventing industrial restructuring"; "inflation undermines the confidence of international investors"; and; "high inflation leads to a skewed distribution of wealth" (8-9).
"Inflation does not arise primarily because someone benefits from inflation per se; it arises primarily because politicians find it difficult to resist the short-term temptations that lead to inflation" (10). "In principle…the IMF can substitute for entrenched domestic institutions by monitoring compliance with stabilization programs and offering rewards and punishments that tip the balance of incentives in favor of the full-commitment equilibrium" (11). "Under favorable circumstances, a virtuous circle can arise, in which IMF intervention, government policies, and international investment reinforce one another" (11). "The picture becomes somewhat more complex, however, when we consider that the IMF's own credibility is in question" (11). "The conclusions show that the IMF's credibility problem is indeed severe, and consequently the organization's effectiveness is compromised in some of the most important countries. At the same time, this study finds ample evidence that the IMF has exerted significant influence over the economic policies of Post-Communist countries" (12).
Countries that are more interesting to global hegemonic interests can not be expected to be controlled by the conditionality constraints of IMF policies. This is so because they can not be expected to control for inflationary policies when the IMF is a political institution that is controlled by hegemonic institutions. For example, if the
The credibility of the IMF conditionality is at stake. Stone promotes an agenda that argues that, if IMF conditionality is seen as being credible, i.e., if the sticks are seen as being real and painful, countries will listen to conditionality. However, if the countries do not believe that the conditionality is going to be enforced, they will evade making painful policy changes. Another aspect of his account is that, if a country is sufficiently interesting to global hegemon power and influence, they will also be increasingly able to evade
The remainder of the book is full of case-studies, of which I will not detail here, though they are quite informative.
