A disaggregated empirical analysis of the determinants of IMF arrangements: Does one model fit all?

Abstract

Does one model fit all when it comes to the determinants of IMF programs? Certainly claims have been made by the IMF that capital account crisis (CAC) countries are discernibly different in terms of the characteristics that lead them to borrow from it, while other research has claimed that it is only Asian economies that are different from the rest. This paper sets out to examine these issues. It tests various forms of a fairly conventional model to see whether some forms better fit certain groups of countries than others. It then uses the favoured models to estimate the probability of countries having an IMF arrangement. In particular it examines countries that have been identified by the Fund as CAC countries, but it also looks at a number of comparator countries. The findings suggest that there are some differences between low income and middle income countries. Pressures in the foreign exchange market are significant for the latter but not for the former. The paper also discusses differences between regions and within regions. Broadly speaking the findings confirm that Asian economies around the time of the 1997|1998 crisis tended to turn to the IMF for financial support more quickly than would have been anticipated on the basis of the existing best-fitting models. The paper also discusses the implications of the findings for policy and for the reform of the IMF. Copyright © 2008 John Wiley & Sons, Ltd.

IMF Lending in Times of Crisis: Political Influences and Crisis Prevention

“…However, the existing literature underlines that the contribution of some of the main explanatory variables of IMF lending might be different between countries with and without access to concessional loans and between lowand middle-income countries (Bal-Gunduz, 2009;Bird & Rowlands, 2009a;Moser & Sturm, 2011). Given the limited sample size, we do not report sub-sample estimates, but we test our main results about the crisis hypothesis interacting the CRISIS and the FRIEND G7 variables with two sets of dummies.…”

“…Besides the intrinsic importance of this period, by limiting the analysis to the IMF response to the current global financial crisis we overcome the problem of the episodic nature of the IMF lending policy which tend to undermine the significance of large sample studies (Bird & Rowlands, 2009a. 3 In fact, we may assume that in the 2-year period considered, strongly characterized by a shared condition (the global crisis) among member states, the IMF lending policy has not undergone major changes, thereby making the investigation of its main determinants a viable and significant research objective.…”

Explaining IMF Lending Decisions After the Cold War

“… CURCRIS (currency crisis): A number of recent studies document that IMF program involvement become more likely during currency crises (e.g., Elekdag, 2008;Bird and Rowlands, 2009b;and Breen, 2010), where the IMF acts as a lender-of-last resort. We follow Frankel and Rose (1996) and Laeven and Valencia (2008) by defining a currency crisis as a nominal depreciation of the currency of at least 30 percent that is also at least a 10 percent increase in the rate of depreciation compared to the year before.…”

The Episodic and Unpredictable Nature of IMF Lending: An Empirical Analysis

“…A concluding section places the analysis and policy proposals in the context of current debates about reforming the Fund and the global financial system. This study complements earlier work of ours (Bird and Rowlands, 2001a, 2002, 2006b, 2009) by analysing the aggregate amount of IMF lending rather than the pattern of lending to individual countries or groups of countries and the probability that individual countries will have programmes with the IMF. However, as will be explained later, the two dimensions of IMF lending are inter‐related.…”