Powerful donors and foreign policy: The role of multilateral financial institutions
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- Bora-import 
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 theMFI’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.
PublisherChr. Michelsen Institute
SeriesCMI Working paper
WP 2004: 12