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IMF Lending and Economic Growth: An Empirical Analysis of Ukraine

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  • Roman Kononenko

Abstract

This study uses Vector Autoregression (VAR) Methodology as well as Vector Error Correction (VEC) Methodology to examine the existence and direction of causality between economic growth and IMF lending for Ukraine. The paper examines the IMF lending data for the period of 1991-2010. Robust empirical analysis indicates that IMF lending has a negative effect of on Ukraine's economic growth in the short term. Policy implications of this finding are that, despite short-run decline in economic growth, IMF lending can result in a long-run sustainable growth for Ukraine. For this, policymakers need to ensure that fund's money are used not only to cover budget's deficit, but also to finance institutional reforms.

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  • Roman Kononenko, 2015. "IMF Lending and Economic Growth: An Empirical Analysis of Ukraine," Papers 1509.01741, arXiv.org.
    • Handle: RePEc:arx:papers:1509.01741
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    1. Vreeland,James Raymond, 2003. "The IMF and Economic Development," Cambridge Books, Cambridge University Press, number 9780521016957.
    2. Dreher, Axel, 2006. "IMF and economic growth: The effects of programs, loans, and compliance with conditionality," World Development, Elsevier, vol. 34(5), pages 769-788, May.
    3. James Vreeland, 2006. "IMF program compliance: Aggregate index versus policy specific research strategies," The Review of International Organizations, Springer, vol. 1(4), pages 359-378, December.
    4. Dicks-Mireaux, Louis & Mecagni, Mauro & Schadler, Susan, 2000. "Evaluating the effect of IMF lending to low-income countries," Journal of Development Economics, Elsevier, vol. 61(2), pages 495-526, April.
    5. Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1245-1269, October.
    6. Michael Binder & Marcel Bluhm, 2010. "On the Conditional Effects of IMF Program Participation on Output Growth," CESifo Working Paper Series 3161, CESifo.
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