IMF Conditionality and the Intertemporal Allocation of Resources

This article analyses the impact of IMF conditionality on the intertemporal allocation of resources in an emerging market economy. The study identifies a principal agent problem between the government of the emerging market and its citizens and shows that conditionality has the potential to mitigate the resulting misallocation of resources. Nevertheless, the analysis indicates that if IMF lending were influenced by geopolitical motives then the suboptimal allocation of resources will remain notwithstanding IMF conditionality