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IMF Programs and Growth: Is Optimism Defensible?

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  • Reza Baqir

    (International Monetary Fund)

  • Rodney Ramcharan

    (International Monetary Fund)

  • Ratna Sahay

    (International Monetary Fund)

Abstract

IMF-supported programs focus on key objectives (such as growth, inflation, and the external current account) and on intermediate policy targets (such as monetary and fiscal policies) needed to achieve these objectives. In this paper we use a new, large data set, with information on 94 programs between 1989 and 2002, to compare programmed objectives and policy targets to actual outcomes. We report two broad sets of results. First, we find that outcomes typically fell short of expectations in growth and inflation but were broadly in line with the programmed external current account objectives. Similarly, programmed intermediate policy targets were generally more ambitious than the intermediate policy outcomes. Second, focusing on growth, we examine the relationship between objectives and policy targets, and find differences in the way ambitious monetary and fiscal targets affected the achievement of the growth objective. On the one hand, more ambitious fiscal targets, even when they were missed, led to better growth performance. On the other hand, more ambitious monetary targets tended to be associated with lower growth performance.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 52 (2005)
Issue (Month): 2 (September)
Pages: 260-286

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Handle: RePEc:pal:imfstp:v:52:y:2005:i:2:p:260-286

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Cited by:
  1. Graham Bird, 2005. "Over-optimism and the IMF," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 28(9), pages 1355-1373, 09.
  2. Ruben Atoyan & Patrick Conway, 2011. "Projecting macroeconomic outcomes: Evidence from the IMF," The Review of International Organizations, Springer, Springer, vol. 6(3), pages 415-441, September.

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