Author's School

Graduate School of Arts & Sciences

Author's Department/Program

Political Science


English (en)

Date of Award

Summer 9-1-2014

Degree Type


Degree Name

Doctor of Philosophy (PhD)

Chair and Committee

Nathan M. Jensen


A large literature in political science has examined International Monetary Fund's (IMF or Fund) lending and monitoring activities and has shown that the Fund sometimes deviates from its original mandates and provides preferential treatment to certain countries. The studies suggests that geopolitical and financial interests of the major shareholders of the Fund and the Fund's bureaucratic incentives to preserve its power and prestige are the main determinants of this behavior. There are also a few studies that demonstrate the same pattern in the Fund's forecasting activities. What is missing in this literature is how other actors such as investors and incumbent governments respond to this behavior and utilize optimistic macroeconomic forecasts. This dissertation argues that optimistic IMF forecasts provide non-economic information to the investors, therefore they respond to them accordingly. Moreover optimistic forecasts enable incumbent governments to pursue expansionary policies and help them to portray the future in a positive light. By comparing IMF forecasts to those of private institutions this dissertation shows that investors respond positively to the IMF optimism for countries that are closely allied with the United States and that have large outstanding debt to the Fund. The empirical analyses also show that optimistic forecasts encourage public spending and thus increase government's chances for reelection.


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