IMF Programs: Who Is Chosen and What Are the Effects?
AbstractIMF loans react to economic conditions but are also sensitive to political-economy variables. Loans tend to be larger and more frequent when a country has a bigger quota and more professional staff at the IMF and when a country is more connected politically and economically to the United States and other major shareholding countries of the IMF. These results are of considerable interest for their own sake. More importantly for present purposes, the results provide instrumental variables for estimating the effects of IMF loan programs on economic growth and other variables. This instrumental estimation allows us to sort out the economic effects of the loan programs from the responses of IMF lending to economic conditions. The estimates show that a higher IMF loanparticipation rate reduces economic growth. IMF lending also lowers investment but raises international openness. In addition, greater involvement in IMF programs tends to lower the rule of law and democracy. We conclude that the typical country would be better off economically if it committed itself not to be involved with IMF loan programs.
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Bibliographic InfoPaper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2003-09.
Length: 55 pages
Date of creation: Apr 2003
Date of revision:
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IMF loan program; economic growth; instrumental variables;
Other versions of this item:
- 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.
- Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc.
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-08 (All new papers)
- NEP-DEV-2004-01-08 (Development)
- NEP-MAC-2004-01-08 (Macroeconomics)
- NEP-RMG-2004-01-08 (Risk Management)
- NEP-SEA-2004-01-08 (South East Asia)
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