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Impact Of Imf-Supported Programs On Economic Sentiments: A Multinomial Ordered Probit Analysis On Transition Economies

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  • PATRICK A. IMAM

    (International Monetary Fund, 700, 19th Street, NW, Washington DC, 20431, USA)

Abstract

This paper analyses the effect of IMF-supported programs on economic agents' sentiment in transition countries. Using multinomial ordered probit models, we find that IMF-supported programs during periods of economic collapse reinforce underlying sentiments; they strengthen confidence in the future for those with an optimistic outlook and weaken sentiments for those with a weak outlook. This reflects the "confirmation bias", a tendency for individuals to prefer information that confirms their preconceptions. Once recovery is underway, IMF arrangements cease to be consequential for the outlook, implying that the biggest impact on sentiments occur during periods of great uncertainty and not during minor shocks.

Suggested Citation

  • Patrick A. Imam, 2013. "Impact Of Imf-Supported Programs On Economic Sentiments: A Multinomial Ordered Probit Analysis On Transition Economies," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-27.
    • Handle: RePEc:wsi:jicepx:v:04:y:2013:i:01:n:s1793993313500038
    DOI: 10.1142/S1793993313500038
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    References listed on IDEAS

    as
    1. Dreher, Axel & Gassebner, Martin, 2012. "Do IMF and World Bank Programs Induce Government Crises? An Empirical Analysis," International Organization, Cambridge University Press, vol. 66(2), pages 329-358, April.
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    More about this item

    Keywords

    Transition; structural adjustment; international monetary fund; confirmation bias; E02; F3; P2;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F3 - International Economics - - International Finance
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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