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Please use this identifier to cite or link to this item: http://hdl.handle.net/10202/132

Title: Powerful donors and foreign policy: The role of multilateral financial institutions
Authors: Villanger, Espen
Keywords: Foreign policies
Conditionality
Unilateralism
JEL: F35, F37, D74, D78
Issue Date: 2004
Publisher: Chr. Michelsen Institute
Series/Report no.: CMI Working paper
WP 2004: 12
Abstract: The opportunity for a powerful donor country, such as the United States, to use a multilateral financial institution (MFI) strategically in order to promote its own foreign policy goals has received little attention. The gain to a donor that is able to make the World Bank or other MFIs adapt to this donor’s view on an issue can be substantial. In that case, all the contributions from the other member nations will also stand behind the MFI’s stance on the particular is sue, and recipients may feel compelled to comply with this massive counterpart. As a result, influencing MFIs may give much more leverage to a donor’s foreign assistance in the foreign policy arena than pursuing the same goals bilaterally with the same amo unt of aid. We present a model where a donor tries to influence a MFI to put pressure on a recipient to comply with the foreign policy interests of the donor. This game-theoretic multi-agent model with one donor, two MFIs and one recipient illustrates the virtue of using the multilateral as an instrument in foreign policy as seen from the powerful donor’s point of view. Similarly, we show how this strategic behavior is damaging for the recipient in particular and for development in general.
URI: http://hdl.handle.net/10202/132
ISBN: 82-8062-096-6
ISSN: 0804-3639
Appears in Collections:CMI Collection (Reports, Working Papers, Articles etc.)

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