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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. 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.
  2. Axel Dreher, 2004. "IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality," International Finance, EconWPA 0404004, EconWPA, revised 25 Apr 2004.
  3. 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.
  4. Michael M. Hutchison, 2004. "Selection Bias and the Output Costs of IMF Programs," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 04-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Michael Binder & Marcel Bluhm, 2010. "On the Conditional Effects of IMF Program Participation on Output Growth," CESifo Working Paper Series 3161, CESifo Group Munich.
  6. Zungun Deniz & Ortanca Murat & Kirli Mustafa & Cura Serkan, 2013. "The End Of Imf - Turkey Relationship," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 183-192, July.
  7. Sánchez, Elmer, 2013. "Grado de inversión y flujos de inversión directa extranjera a economías emergentes," Revista Estudios Económicos, Banco Central de Reserva del Perú, Banco Central de Reserva del Perú, issue 26, pages 61-79.
  8. Axel Dreher, 2008. "IMF Conditionality: Theory and Evidence," KOF Working papers 08-188, KOF Swiss Economic Institute, ETH Zurich.
  9. Reynaud, Julien & Vauday, Julien, 2009. "Geopolitics and international organizations: An empirical study on IMF facilities," Journal of Development Economics, Elsevier, Elsevier, vol. 89(1), pages 139-162, May.
  10. Eugenio Cerutti, 2007. "Imf Drawing Programs," IMF Working Papers 07/152, International Monetary Fund.
  11. Noy, Ilan, 2008. "Sovereign default risk, the IMF and creditor moral hazard," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 18(1), pages 64-78, February.
  12. ORASTEAN Ramona, 2014. "The Lending Arrangements Of The Imf In European Union In Times Of Crisis – Characteristics And Evolutions," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 9(1), pages 134-141, April.
  13. Graham Bird & Alex Mandilaras, 2007. "Foreign Exchange Pressures in Latin America: Does Debt Matter?," School of Economics Discussion Papers, School of Economics, University of Surrey 1307, School of Economics, University of Surrey.
  14. Javed, Omer, 2014. "Institutional quality, macroeconomic stabilization and economic growth: a case study of IMF programme countries," MPRA Paper 56370, University Library of Munich, Germany.

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