Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Leftist governments in the developing world have more frequently infringed on the property rights of investors by nationalization, expropriation and confiscation. Although some leftist politicians proclaim to pursue free-market policies to attract investment, they often fail to back up their proclamations and thus face difficulties establishing policy credibility. Restoring investor confidence is important for domestic market development and global economic stability. Focusing on government bond markets, this paper examines whether leftist governments get penalized in international markets and how they can restore investor confidence. Specifically, this paper empirically tests whether IMF programs can benefit leftist governments in restoring investor confidence by providing policy credibility. Using data on sovereign credit ratings in almost 90 developing countries from 1980 to 2002, I find that investors tend to downgrade leftist governments when other economic and policy outcomes are controlled for. Contrary to the conventional belief, IMF programs negatively affect sovereign credit ratings both in leftist and non-leftist governments, and the negative effects are greater in leftist governments.

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Since the late 1990s, the IMF has adopted a series of reforms in response to mounting criticisms of its mode of operation in the wake of major financial crises in emerging market countries. One part of the reform is concerned with the internal organization and operation of the Fund; and the other major part focuses on the institutional reform of the domestic financial systems of developing countries in order to prevent financial market crises. My paper asks: Has the recent IMF reform affected, in any significant ways, borrowing governments’ implementation of, and compliance with, the Fund’s stand-by agreements?. Has the IMF reform and more particularly, revised IMF conditionality, increased the effectiveness of IMF lending programs in terms of borrowing countries’ economic performance as well as financial crisis prevention?There are a number of studies that investigate the degree of compliance with, and the results of, IMF lending programs in various developing countries. Many of these studies use a large-N statistical method. Although they have produced important findings, these studies tend to have the same major weakness. They almost exclusively focus on macro-economic variables because they are easy to quantify. They usually neglect the micro-institutional reforms the IMF requires borrowing countries to carry out in their domestic financial sectors. This is a serious weakness especially given the fact that in the past several years, the Fund has started to put more emphasis on institutional financial reform. My paper uses an alternative comparative method for studying the implementation and effects of IMF stand-by arrangements. Turkey provides a unique opportunity for studying the results of the recent IMF lending policy reform by using a diachronic comparative method. Turkey signed a stand-by agreement following a major financial crisis in 1994, that is, shortly before the IMF reform, and another stand-by agreement in 2001, that is, after the IMF’s adoption of some important reforms. The paper compares the implementation and results of the 1994 agreement and those of the 2001 agreement. It argues that while the IMF’s structural conditionality has become more intrusive with respect to borrowing states’ policies, it has a better chance of being implemented. A major reason for this is the fact that the new structural policy conditions in IMF loan packages are generally less accessible to the general public compared to the Fund’s traditional macroeconomic policy conditions; and hence they generate less opposition. However, improved compliance does not necessarily mean better results. The paper argues that the reformed IMF conditionality does not adequately address the problem of great economic instability created by enormous short-term financial flows in and out of emerging market countries such as Turkey.

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: Why do some IMF loan agreements require more structural adjustment conditions than others? The IMF contends that designing loan programs is an apolitical and technical process as conditions are devised to fix existing economic policies. However, designing

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Turkey and Argentina both had a severe financial crisis in 2001 which had disastrous social and economic effects. These two countries followed different paths for their recovery from the crises. Argentina is a case that has recovered with a hard stand against the IMF and Turkey is a case which has recovered by surrendering to the IMF. Turkey, with the exceptional help it received from the IMF, followed a strict structural adjustment program advised by the IMF. On the other hand, Argentina was abandoned by all creditors, including the IMF, in the midst of its crisis. It defaulted on its debt and then restructured its bonds. By 2007 both countries have economically recovered but with different degrees. Taking the official goal of the IMF into consideration, one would expect Turkey to have a faster and healthier recovery. However, Turkey had a faster but a less healthy recovery. Argentina ended up with more growth, less unemployment, and much better current account and trade balance compared to Turkey. Then, is the IMF help a curse, not a cure, for the developing nations which face financial crises? It looks like the answer is “yes,” at least for the long term. This paper argues that the IMF hinders diverse and potentially more successful macroeconomic policies in developing countries. In fact, as shown by the Argentine case, during financial crises relying on the domestic sources of strength and following more independent policies may work better than the IMF sponsored policies.

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Leftist governments in the developing world are perceived as risky for private investment_x000d_because of their greater policy uncertainty and more frequent property rights infringement. Focusing on government bond markets, this paper empirically examines whether leftist governments are penalized in international markets and whether international institutions that are believed to provide policy credibility can help these governments gain investor confidence. Specifically, I focus on the effect of IMF conditionality. Using selection-corrected, time-series-cross-sectional statistical analyses of sovereign credit ratings data of more than 100 countries from 1980 to 2004, I find that IMF conditionality helps leftist governments in developing countries_x000d_improve investor confidence.