IMF and economic growth: The effects of programs, loans, and compliance with conditionality

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractIn theory, the IMF could influence economic growth via several channels, among them advice to policy makers, money disbursed under its programs, and its conditionality. This paper tries to disentangle those effects empirically. Using panel data for 98 countries over the period 1970-2000 it analyzes whether IMF involvement influences economic growth in program countries. Consistent with the results of previous studies, it is shown that IMF programs reduce growth rates when their endogeneity is accounted for. There is only weak evidence that compliance with conditionality mitigates this negative effect. IMF loans have no statistically significant impact.

Does the IMF Influence Fiscal and Monetary Policy?

“…Nevertheless, the literature so far made no attempt to disentangle them, the exception being Dreher (2004a), who studied the influence of the IMF on economic growth in the borrowing countries.…”

Electoral Confidence and Political Budget Cycles in Non-OECD Countries

“…In other words, poor growth rates or recession could increase the incentive to create PBCs. 19 Fourth, as varying levels of government revenues might affect the incumbent's ability to create PBCs, we include three variables that capture the government's distributive capacity: Tax revenues/GDP, taken from the GSRE (Lucas & Richter, 2016), which measures the sum of all direct and non-direct Fifth, we include a dummy variable for IMF agreements, taken from an updated version of Dreher (2006), as the existence of such agreements might also reduce the incumbent's ability to manipulate the budget. Sixth, the incumbent's ability to create PBCs might be affected by a country's debt ratio, which is why we control for Debt service, taken from the World Bank (2010) and measured as a share of the gross national income.…”

Does IMF Support Accelerate Inflation Stabilization?

“…Although a target for the rate of inflation was not generally included in the list of quantitative performance criteria, inflation reduction/stabilization was among the main objectives of the IMF programs implemented in the sample countries (see the IMF annual reports for descriptions of the programs' main objectives and the IMF webpage for the Letters of Intent signed since 1998). 4 According to Hutchison and Noy (2003), the failure of stabilization programs in Latin America is related to the low completion rates of IMF programs (see Dreher, 2004, for data on interruptions of IMF Stand-By and EFF Programs). A pessimistic view of compliance with conditionality and of the effectiveness of IMF-supported programs is that of Evrensel (2002), according to whom the IMF cannot impose its conditionality even during program years, and, on average, program countries enter a new program in worse macroeconomic situation than before.…”