In This Review

Lending Credibility: The International Monetary Fund and the Post-Communist Transition
Lending Credibility: The International Monetary Fund and the Post-Communist Transition
By Randall W. Stone
Princeton University Press, 2002, 286 pp.

The IMF has come under heavy criticism in recent years for its inability to prevent financial crises and promote effective economic reforms. In a meticulous analysis, political scientist Stone addresses the role of the IMF in former communist countries making the transition to market economies. He sets out a game-theoretic framework involving national governments, the IMF, and international investors. This framework is closely argued but accessible and produces some surprising solutions. The model's predictions are generally born out by statistical tests. Fascinating and well-argued case studies of the interactions between the IMF and national officials are provided for Bulgaria, Poland, Russia, and Ukraine. A main finding is that countries especially important to the United States -- such as Russia and Ukraine -- violate IMF conditions more often but regain access to credit more quickly than do other countries; as a result, they have experienced worse economic performance. In other words, the IMF is more credible, hence more effective, when the United States is less engaged. It is a fine example of modern social science, although one can criticize it for exploring only monetary variables as measures of performance. Thus the study invites extension both to other variables and to other countries.