Why delegate to the IMF? Congressional preference and blame avoidance

Abstract

Why has the United States delegated most of its crisis lending to the International Monetary Fund (IMF) in recent years, although it provided large-scale bilateral bailouts to strategically important countries until the mid-1990s? Previous research on the choice of bailout strategy has failed to explain this important change, and a major problem with such research is that it has focused on executive branch preferences, overlooking those of the legislative branch. The legislature can significantly influence the choice of bailout policies, and existing research also implies that the US Congress has steered the recent change. This article hypothesizes that, caught in a dilemma between the need for bailouts and voters’ opposition caused by widening inequality, Congress delegated bailouts to the IMF for blame avoidance. To test this hypothesis, the study conducts a statistical analysis of the IMF’s capital increase votes and case analyses of the Mexican and Asian crises.