Abstract

Critics of the IMF and the World Bank have long suggested that these two international economic organizations routinely fail to achieve their development goals and should hence be abolished. This article explores empirically whether the IMF and World Bank’s financial assistance to developing countries have failed or succeeded in promoting economic development across the developing world. The empirical analysis reveals that aid and loans from the IMF and the World Bank have a positive effect on economic development in developing countries that are democracies, but have a negligible or sometimes negative effect on development in developing nations that are autocratic. Thus the impact of funds from the IMF and the World Bank on development is critically dependent on the political regime type of countries that receive assistance from these institutions. Given this central finding, the article proposes three policy goals that U.S. administrations should pursue to enhance the IMF and the World Bank’s ability to promote economic development in developing countries.

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