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IMF lending and firm investment decisions

Author

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  • Bomprezzi, Pietro
  • Marchesi, Silvia
  • Turk-Ariss, Rima

Abstract

This paper investigates the dynamic aggregate response of firm investments to the approval of an IMF arrangement, distinguishing between General Resource Account (GRA) and Poverty Reduction and Growth Trust (PRGT). Using a stacked difference-in-differences estimator and leveraging firm-level characteristics, we find that firms relying more on external finance, those more exposed to uncertainty, or those with domestic ownership tend to increase investments significantly following a GRA agreement. In contrast, the effect is much more limited in the case of PRGT financed programs. The results contribute to the growing literature on the channels through which IMF programs influence the real economy, offering nuanced insights into how these interventions shape private sector dynamics and broader economic development.

Suggested Citation

  • Bomprezzi, Pietro & Marchesi, Silvia & Turk-Ariss, Rima, 2025. "IMF lending and firm investment decisions," Economics Letters, Elsevier, vol. 253(C).
    • Handle: RePEc:eee:ecolet:v:253:y:2025:i:c:s0165176525002198
    DOI: 10.1016/j.econlet.2025.112382
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    More about this item

    Keywords

    IMF; Firm investment; Financial frictions; Difference-in-differences;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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