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In this work, Jeffrey Chwieroth explores the inner workings of the IMF to understand how it staff's thinking about capital controls changed so radically. In doing so, he also provides an important case study of how international organizations work and evolve.

The past three decades have shown the increasing importance of the efforts of the international financial community to socialize emerging markets to accept norms of financial governance. Social sanctions often have been used to mark non-compliant states and their policies as deviant. Yet, we know little about how deviant states strategically manage such policy stigmas in international finance and how this management shapes the international normative order. Recent scholarship in international relations suggests that stigma management strategies tend to either reinforce or fracture the international normative order. This article, by contrast, contends that such strategies also have the potential to transform the international normative order so that it resembles more closely the preferences of the deviant. This argument is illustrated using evidence drawn from Brazil and South Korea's management of the policy stigma associated with controls on capital inflows. Adapted from the source document.

As a result of a long-running internal debate there have been notable incremental changes to how the International Monetary Fund (IMF) treats capital controls, particularly those directed at inflows. These changes combine new acceptance of these policy instruments with an older emphasis on their negative consequences and on the desirability of free movement of capital. Policy change of this sort is puzzling from the standpoint of the existing literature on international organisations (IOs), which has thus far paid little attention to transformative incremental change associated with long-term contestation. This article departs from this tendency by drawing on insights from principal-agent theory, constructivism and historical institutionalism to identify the conditions under which such change may originate. I argue that actors within IOs are likely to pursue incremental change by layering new policies on to old ones as a way to build coalitions and to respond to external organisational insecurity imperatives and diverse member state preferences and to internal path-dependent organisational cultural features. Over time the incremental shifts brought by layering can induce transformative rather than reproductive change because they fit with consequentialist and appropriateness behavioural logics. I illustrate this argument by investigating recent changes in IMF policy on capital controls. Adapted from the source document.

This paper examines how the staff exercise informal governance over lending decisions of the International Monetary Fund (IMF or Fund). The essential component of designing any IMF program, assessing the extent to which a borrowing country is likely to fulfill its policy commitments, is based partly on informal staff judgments subject to informal incentives and normative orientations not dictated by formal rules and procedures. Moreover, when country officials are unable to commit to policy goals of the IMF, the IMF staff may bypass the formal channel of policy dialogue through informal contacts and negotiations with more like-minded actors outside the policymaking process. Exercising informal governance in these ways, the staff are motived by informal career advancement incentives and normative orientations associated with the organization's culture to provide favorable treatment to borrowers composed of policy teams sympathetic toward their policy goals. The presence of these sympathetic interlocutors provides the staff both with greater confidence a lending program will achieve success and an opportunity to support officials who share their policy beliefs. I assess these arguments using a new dataset that proxies shared policy beliefs based on the professional characteristics of IMF staff and developing country officials. The evidence supports these arguments: larger loan commitments are extended to countries where government officials and the Fund staff share similar professional training. The analysis implies informal governance operates in IOs not just via state influence but also through the evolving makeup, incentive structure, and normative orientations of their staffs. Adapted from the source document.