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IMF Programs: Who is Chosen and What Are the Effects?

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  • Robert J. Barro
  • Jong-Wha Lee

Abstract

IMF lending practices respond to economic conditions but are also sensitive to political-economy variables. Specifically, the sizes and frequencies of loans are influenced by a country's presence at the Fund, as measured by the country's share of quotas and professional staff. IMF lending is also sensitive to a country's political and economic proximity to some major shareholding countries of the IMF -- the United States, France, Germany, and the United Kingdom. We measured political proximity by voting patterns in the United Nations and economic proximity by bilateral trading volumes. These results are of considerable interest for their own sake but also provide instrumental variables for estimating the effects of IMF lending on economic performance. Instrumental estimates indicate that the size of IMF lending is insignificantly related to economic growth in the contemporaneous five-year period but has a significantly negative effect in the subsequent five years.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8951.

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Date of creation: May 2002
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Publication status: published as Barro, Robert J. and Jong-Wha Lee. "IMF Programs: Who Is Chosen And What Are The Effects?," Journal of Monetary Economics, 2005, v52(7,Oct), 1245-1269.
Handle: RePEc:nbr:nberwo:8951

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