On the conditional effects of IMF program participation on output growth

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. The empirical evidence currently available in the literature regarding the effects of a country's IMF program participation on its output growth is rather mixed. To shed new evidence on this issue, in this paper we specify a state-dependent panel data model accounting in particular for program participation selection and the potential conditionality of the output growth effects of program participation on a country's degree of program implementation and institutional factors such as quality of governance, internal stability, health, and educational attainment. We find that the effects of IMF program participation on output growth vary systematically with the degree of program implementation as well as our index of institutional factors, and that these effects are positive only if the IMF program is implemented to a sufficient degree or if the program participation is coupled with sufficient progress in improving institutional quality. Terms of use: Documents inJEL-Code: O11, O19, C33.

Covid‐19, Economic Growth and South African Fiscal Policy

“…For instance, Barro and Lee (2005), as well as Przeworski and Vreeland (2000) conclude that IMF programmes have a negative effect on output growth, while Dicks‐Mireaux et al (2000) as well as Bas and Stone (2014) conclude that IMF programmes have a positive effect on growth. However, in a recent study, Binder and Bluhm (2017) show that the effects of IMF programmes on economic growth is positive only if it is accompanied by a sufficient improvement of the country’s institutional record. Using the World Bank’s Country Policy and Institutional Assessment Index (CPIA) as an indicator in their empirical work, Binder and Bluhm (2017) show that when countries under IMF programmes improve public sector governance, institutions and social inclusion before and during the programme period, the IMF programme has a positive impact on economic growth.…”

“…However, in a recent study, Binder and Bluhm (2017) show that the effects of IMF programmes on economic growth is positive only if it is accompanied by a sufficient improvement of the country’s institutional record. Using the World Bank’s Country Policy and Institutional Assessment Index (CPIA) as an indicator in their empirical work, Binder and Bluhm (2017) show that when countries under IMF programmes improve public sector governance, institutions and social inclusion before and during the programme period, the IMF programme has a positive impact on economic growth. Binder and Bluhm (2017) also show that the positive effects can last up to 6 years after the IMF programme started and 3 years after the programme’s conclusion.…”

Evaluating the Impact of Non-Financial IMF Programs Using the Synthetic Control Method

“…11 Blonigen et al (2007) use a composite risk index, but that variable is not available for most countries included in the present study. Note: the covariate list for real GDP per capita is inspired by Barro and Sala-i-Martin (1995), the list for the CPI is inspired by Ghosh, Ostry, and Tsangarides (2010), while that for the capital stock is inspired by Blonigen et al (2007).…”

“…At the same time, Bas and Stone (2014) find large heterogeneity -with governments that are most eager to participate in IMF programs typically experiencing the least beneficial effects. Taking adverse selection into account, Binder and Bluhm (2017) furthermore show that IMF programs only boost output if they are accompanied by institutional improvements.…”

“…-who in turn based his choice onBlonigen et al (2007) -by including the following covariates: population size (to reflect potential market size), openness (the sum of exports and imports as a share of GDP), the secondary school enrolment rate, the tertiary school enrolment rate, an index of capital account openness (see Chinn and Ito(2006)), and the absolute value of latitude. The latter two series are included to proxy for, what Blonigen et al (2007) call, "host-country investment costs".…”