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Macroeconomic effects of IMF-sponsored programs in Latin America: output costs, program recidivism and the vicious cycle of failed stabilizations

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  • Michael Hutchison
  • Ilan Noy

Abstract

We investigate the effects of IMF stabilization programs, and the reasons behind the unusually high IMF activity and relatively low program completion rates in Latin America. We base our tests on a panel, and distinguish between IMF program approvals and completion. We find that Latin America has higher output costs of IMF programs (especially when completed), no improvement in the current account, and a much higher likelihood of program failure and recidivism than other regions. The common finding that entering into an IMF-supported program incurs real short-run costs on the economy is entirely driven by the experiences in Latin America.

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Pacific Basin Working Paper Series with number 03-02.

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Date of creation: 2003
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Handle: RePEc:fip:fedfpb:03-02

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Keywords: Economic development - Latin America ; International Monetary Fund ; Macroeconomics;

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Citations

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Cited by:
  1. Alex Mandilaras & Graham Bird, 2008. "Foreign exchange pressures in Latin America: does debt matter?," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(5), pages 613-627.
  2. Barry Eichengreen & Poonam Gupta & Ashoka Mody, 2008. "Sudden Stops and IMF-Supported Programs," NBER Chapters, in: Financial Markets Volatility and Performance in Emerging Markets, pages 219-266 National Bureau of Economic Research, Inc.
  3. Axel Dreher, 2008. "IMF Conditionality: Theory and Evidence," KOF Working papers 08-188, KOF Swiss Economic Institute, ETH Zurich.
  4. Michael Binder & Marcel Bluhm, 2010. "On the Conditional Effects of IMF Program Participation on Output Growth," CESifo Working Paper Series 3161, CESifo Group Munich.
  5. Reynaud, Julien & Vauday, Julien, 2009. "Geopolitics and international organizations: An empirical study on IMF facilities," Journal of Development Economics, Elsevier, vol. 89(1), pages 139-162, May.
  6. Axel Dreher, 2004. "IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality," TWI Research Paper Series 1, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  7. Yasemin Bal-Gunduz, 2009. "Estimating Demand for IMF Financing by Low-Income Countries in Response to Shocks," IMF Working Papers 09/263, International Monetary Fund.
  8. Eugenio Cerutti, 2007. "IMF Drawing Programs: Participation Determinants and Forecasting," IMF Working Papers 07/152, International Monetary Fund.

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