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IMF Conditionality and Program Ownership: A Case for Streamlined Conditionality

S. Nuri Erbaș
Emerging Markets Finance & Trade
Vol. 40, No. 3, Conditionality and Effectiveness of IMF Programs in Emerging Economies (May - Jun., 2004), pp. 10-25
Published by: Taylor & Francis, Ltd.
Stable URL: http://www.jstor.org/stable/27750389
Page Count: 16
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IMF Conditionality and Program Ownership: A Case for Streamlined Conditionality
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Abstract

Program conditionality and ownership are important considerations in the International Monetary Fund's current rethinking of program design. This paper contributes to the literature by developing a theory of program conditionality and ownership on the basis of Cumulative Prospect Theory. The policymaker may value a set of programs, each with fewer conditions, more than an extended program with a many conditions. This valuation bias is greater in ambiguity (Knightian uncertainty) than under uncertainty. If greater valuation of a program engenders more explicit and implicit ownership, then programs with fewer conditions may have a better chance of success. Less is more.

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