IMF lending: how is it affected by economic, political and institutional factors?

Abstract

In seeking to understand IMF lending early large sample econometric studies tended to focus on economic factors. Political and institutional influences were often deemed to be reflected in the frequently large residual. At the same time increasing anecdotal evidence was being amassed to suggest that political factors were indeed important. However, more recent studies have claimed that, by using superior estimating techniques, a satisfactory explanation of Fund lending can be provided without needing to include political and institutional factors, which are in any case difficult to measure and model. This study shows that there is large sample evidence supporting the importance of some of these variables, though their contribution to predicting the pattern of IMF agreements is minimal. It goes on to discuss some of the implications of this for the Fund as the world's premier international financial institution. The research upon which this paper is based was supported by the UK Department for International Development (DFID). While this support is gratefully acknowledged, the views and opinions expressed are those of the authors alone. Thanks to Chris Worswick and two anonymous referees for comments, and Connie Tulus and Helgi Maki for research assistance.

Imf Drawing Programs: Participation Determinants and Forecasting

“…5 Thus, in line with most of the previous empirical studies on estimating the characteristics of Fund arrangements (e.g. Joyce 1992, Conway 1994, Knight and Santaella 1997, Przeworski and Vreeland 2000, Bird and Rowlands 2001, Elekdag 2006, this paper models participation in an IMF drawing program as a binary choice. More precisely, in this paper, a program period is defined as a drawing program from its approval until the last disbursement under the program, with the caveat that the timing of the first disbursement is taken instead of the approval if the first disbursement was more than two quarters after the approval or if the program was precautionary upon approval.…”

“…Joyce 1992, Conway 1994, Vreeland 2004, or the determinants of program approval in a given year (e.g. Knight and Santaella 1997, Przeworki and Vreeland 2000, Bird and Rowlands 2001, Barro and Lee 2005, Elekdag 2006). In general, the literature usually includes, as determinants, country-specific economic variables (e.g.…”

“…Countries experiencing slow or negative real growth will be more likely to borrow due to lower government revenues, and thus, a negative sign is expected. In the literature, Knight and Santaella (1997) and Barro and Lee (2005) find real GDP per capita growth significant and with the expected negative coefficient, even though Bird and Rowlands (2001) do not find this variable significant. Second, a measure of CPI inflation is included.…”

“…Joyce 1992, Knight and Santaella 1997, Bird and Rowlands 2001, or as an intermediate step to evaluate the impact of IMF programs in terms of growth, exchange rate stability, and/or balance of payments (e.g. Conway 1994, Przeworki and Vreeland 2000, Barro and Lee 2005.…”

Social Unrest in the Wake of IMF Structural Adjustment Programs

“…3 It is claimed that they may reduce welfare, exacerbate income inequalities, and ultimately provoke social unrest as those in society hit by the SAPs lash out in response. Stiglitz (2002) The purpose of this paper is to try to understand the relationship between the imposition of SAPs and the occurrence of social unrest.…”