The International Monetary Fund in the Global Economy, Banks, Bonds and Bailouts by Mark S Copelovitch

Reviewer: Teresa Reidy^*

This book is a timely examination of the global role of the International Monetary Fund (IMF). It is the culmination of a PhD project and demonstrates an enormous depth of research, as might be expected from doctoral studies. The central argument is that the IMF is a highly politicised organisation and this dynamic has been a determining factor in the policies which have been meted out to nations. The politicisation stems from both the shareholders and the staff.

The book is organised into four main chapters. The first two focus exclusively on the IMF. Chapter two outlines the theoretical underpinnings of the IMF while chapter three provides an empirical test. Chapter two develops a principal/agent theory approach to the Fund’s decision-making. It posits that the politicisation of the Fund is more complex than some studies suggest and argues that shareholders and staff have significant roles and that, among the shareholders, it is not just the United States of America which is predominant. European States and other G8 nations are also significant power blocs. The empirical evidence presented in chapter three is drawn from a time-series analysis of IMF lending decisions over the period 1984-2003. In particular, the statistical evidence is clear in detailing changes in size and conditions of IMF loans as well as reinforcing information on the nature of financial globalization and how this has directly impacted on IMF lending.

Chapters four and five provide case studies of IMF lending to Mexico and South Korea. These chapters are among the strengths of the study in that they add considerable additional substance and detail to the statistical analysis provided in chapter three. Both Mexico and South Korea received loans from the IMF across two decades and they are insightful units for comparison. Mexico received four loans from the IMF and South Korea three in the period under examination. The case studies are used to provide insights into changes in the decision-making process in the IMF across time and units of comparison. The chapters are especially detailed in places but they undoubtedly underscore the major argument of the book which is that IMF lending practices are the product of changes in financial globalization and global capital flows and the politicised structures within the institution.

Overall, this is a detailed and insightful piece of work. It displays considerable original research and makes extensive use of both IMF data and documentation, particularly in the empirical chapters. The combination of statistical analysis of the lending along with the qualitative case studies is especially noteworthy and marks a serious and comprehensive contribution to the literature on global financial institutions. Furthermore, the framework employed for evaluating decision-making processes could be adapted and employed in the study of other international financial institutions and this may indeed be the most significant contribution of the work. The book is well written, the structure is excellent and the analysis and discussion are clear and insightful.

The book is contributing to a serious contemporary debate on the nature and policies of the IMF and it is particularly timely in the midst of a European financial crisis where the IMF is a central player. Nevertheless, some of the conclusions may make for unsettling reading, especially for countries that have recently been beneficiaries of IMF interventions.