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How Does the Global Economic Environment Influence the Demand for IMF Resources

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  • Selim Elekdag

Abstract

The main objective of this paper is to quantify the relationship between the global economic environment and the number of Stand-By Arrangements (SBAs). The results suggest that oil prices, world interest rates, and the global business cycle are the most influential indicators that affect the number of SBAs being requested. In addition, the empirical model seems to have reasonable accuracy when predicting SBAs. Furthermore, when oil prices, interest rates, and the global business cycle are adversely shocked by one standard deviation, the conditional probability of a SBA nearly doubles, implying an increase from about six to 12 SBAs. More critically, the model suggests that even a steady deterioration of the global economic climate would imply increasingly harsher conditions for developing and emerging market countries which may in turn significantly increase the demand for IMF resources.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/239.

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Length: 33
Date of creation: 01 Oct 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/239

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Keywords: Economic indicators; probability; current account; predictions; current account balance; credit tranches; balance of payments; statistics; credit tranche; prediction; linear trend; standard deviation; debt restructuring; independent variables; fixed effects estimator; debt service; surveys; equations; general resources account; dummy variable; sovereign debt; optimization; standard deviations; sample size; external debt; descriptive statistics; estimation procedure; debt crises; external shocks; sovereign debt crises; external debt position; reserve assets; empirical framework; repurchases; repayments; samples; imf credit outstanding; statistic; independent variable; cumulative distribution function; domestic currency; private creditors; debt relief; debt burden; external debt burden; correlation; debt problems; forecasting; current account deficits; government deficits; bilateral creditors; time series; covariance; equation; correlations; debt service obligations; debt servicing; sensitivity analysis; budget balance; debt rescheduling; international lending; logarithm; empirical model; econometrics;

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References

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  1. 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.
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  3. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
  4. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
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  6. Andrew Berg & Eduardo Borensztein & Catherine A. Pattillo, 2004. "Assessing Early Warning Systems," IMF Working Papers 04/52, International Monetary Fund.
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  8. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
  9. Albuquerque, Rui & Loayza, Norman & Serven, Luis, 2005. "World market integration through the lens of foreign direct investors," Journal of International Economics, Elsevier, vol. 66(2), pages 267-295, July.
  10. Joyce, Joseph P., 1992. "The economic characteristics of IMF program countries," Economics Letters, Elsevier, vol. 38(2), pages 237-242, February.
  11. Marchesi, Silvia, 2003. "Adoption of an IMF programme and debt rescheduling. An empirical analysis," Journal of Development Economics, Elsevier, vol. 70(2), pages 403-423, April.
  12. Ari Aisen, 2004. "Money-Based Versus Exchange-Rate-Based Stabilization," IMF Working Papers 04/94, International Monetary Fund.
  13. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  14. Knight, Malcolm & Santaella, Julio A., 1997. "Economic determinants of IMF financial arrangements," Journal of Development Economics, Elsevier, vol. 54(2), pages 405-436, December.
  15. Graham Bird & Dane Rowlands, 2001. "IMF lending: how is it affected by economic, political and institutional factors?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 4(3), pages 243-270.
  16. Bird, Graham & Hussain, Mumtaz & Joyce, Joseph P., 2004. "Many happy returns? Recidivism and the IMF," Journal of International Money and Finance, Elsevier, vol. 23(2), pages 231-251, March.
  17. Conway, Patrick, 1994. "IMF lending programs: Participation and impact," Journal of Development Economics, Elsevier, vol. 45(2), pages 365-391, December.
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Citations

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Cited by:
  1. Oberdabernig, Doris A., 2013. "Revisiting the Effects of IMF Programs on Poverty and Inequality," World Development, Elsevier, vol. 46(C), pages 113-142.
  2. 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.
  3. Christoph Moser & Jan-Egbert Sturm, 2011. "Explaining IMF lending decisions after the Cold War," The Review of International Organizations, Springer, vol. 6(3), pages 307-340, September.
  4. Eugenio Cerutti, 2007. "Imf Drawing Programs," IMF Working Papers 07/152, International Monetary Fund.

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