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The Incidence and Effectiveness of Prior Actions in IMF-Supported Programs

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  • Uma Ramakrishnan
  • Alun H. Thomas
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    Abstract

    Prior actions are measures that need to be implemented prior to Board approval of an IMFsupported program. This paper examines whether such prior actions can signal a willingness to implement reforms, especially when the member''s track record is weak. We find some support for this signaling role, particularly for programs supported by the General Resources Account (GRA). Controlling for the member''s previous track record, prior actions are associated with greater compliance with other structural conditions, suggesting their possible use as a screening device. Moreover, prior actions set at program approval serve as a useful screening device and strengthen the macroeconomic targets set out in the IMF-supported program. The results also reveal a demonstrable screening effect on growth over the medium term, since the growth impact of the ratio of prior actions at the outset versus the rest of the program is significantly positive while the total number of prior actions is not statistically significant.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/213.

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    Length: 24
    Date of creation: 01 Sep 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/213

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    Related research

    Keywords: Conditionality; Economic reforms; inflation; inflation rate; structural conditionality; nominal interest rate; terms of trade; structural adjustment; adjustment programs; macroeconomic performance; real interest rate; conditional lending; structural adjustment programs; economic adjustment;

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    Cited by:
    1. Songying Fang & Erica Owen, 2011. "International institutions and credible commitment of non-democracies," The Review of International Organizations, Springer, vol. 6(2), pages 141-162, July.

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