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IMF Stabilization Programs, Policy Conduct and Macroeconomic Outcomes: A Case Study of Pakistan

  • Nawaz A. Hakro

    ()

    (Assistant Professor Economics, Quaid-e-Azam University, Islamabad, Pakistan.)

  • Wadho Waqar Ahmed

    ()

    (Management Officer, Bank Alfalah Limited, Pakistan.)

This study is designed to assess the macroeconomic performance of fund-supported programs, and the sequencing and ordering of macroeconomic policies in the context of the Pakistan economy. The generalized evaluation estimator technique has been used to assess the macroeconomic impacts of the IMF supported programs. GDP growth, inflation rate, current account balance, fiscal balance and unemployment are used as the target variables in order to gauge economic performance during the program years. The vector of policy variables (that might have been adopted in the absence of programs) and the vector of foreign exogenous variables are also taken asexplanatory variables in the model, so that the individual effect of the IMF supported programs could be assessed. The result suggests that asthe IMF prescriptions were applied, the current account balance has worsened, the unemployment rate has significantly increased, and the inflation rate has increased during the years of fund-supported programs. Onlythe budget balance has shown signs of improvement. Furthermore an inadequate sequencing of reforms has contributed to the further worsening of the economic scenario during the program period.

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Article provided by Department of Economics, The Lahore School of Economics in its journal Lahore Journal of Economics.

Volume (Year): 11 (2006)
Issue (Month): 1 (Jan-Jun)
Pages: 35-62

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Handle: RePEc:lje:journl:v:11:y:2006:i:1:p:35-62
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  1. Mohsin S. Khan, 1990. "The Macroeconomic Effects of Fund-Supported Adjustment Programs," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 195-231, June.
  2. Balassa, Bela, 1982. "Structural adjustment policies in developing economies," World Development, Elsevier, vol. 10(1), pages 23-38, January.
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  8. Mushtaq Ahmad, 1998. "Fiscal Adjustment: Trade-offs of Macro-economic Goals and Recent Policy Reforms in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(4), pages 1123-1142.
  9. Helpman, Elhanan & Razin, Assaf, 1987. "Exchange Rate Management: Intertemporal Tradeoffs," American Economic Review, American Economic Association, vol. 77(1), pages 107-23, March.
  10. Kiguel, Miguel A & Liviatan, Nissan, 1992. "The Business Cycle Associated.with Exchange Rate-Based Stabilizations," World Bank Economic Review, World Bank Group, vol. 6(2), pages 279-305, May.
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  12. Cukierman, Alex & Liviatan, Nissan, 1992. "The Dynamics of Optimal Gradual Stabilizations," World Bank Economic Review, World Bank Group, vol. 6(3), pages 439-58, September.
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  16. Faiz Bilquees, 1987. "The IMF Stabilization Package and Pakistan's Stabilization Experience," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 26(4), pages 767-774.
  17. Conway, Patrick, 1994. "IMF lending programs: Participation and impact," Journal of Development Economics, Elsevier, vol. 45(2), pages 365-391, December.
  18. Michael Bruno, 1992. "Stabilization and Reform in Eastern Europe; A Preliminary Evaluation," IMF Working Papers 92/30, International Monetary Fund.
  19. Rattan J. Bhatia, 1975. "Fiscal and Monetary Policy for Internal and External Stabilization Under Fixed and Floating Rates in the Presence of Capital Movements," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 14(1), pages 23-32.
  20. Soojin Moon & Ales Bulir, 2003. "Do IMF-Supported Programs Help Make Fiscal Adjustment More Durable?," IMF Working Papers 03/38, International Monetary Fund.
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  22. Mohsin S. Khan & Sunil Sharma, 2001. "IMF Conditionality and Country Ownership of Programs," IMF Working Papers 01/142, International Monetary Fund.
  23. Drazen, Allan & Helpman, Elhanan, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 835-55, November.
  24. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
  25. Rashid Amjad, 2003. "Solving Pakistan's Poverty Puzzle: Whom Should We Believe? What Should We Do?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 375-393.
  26. Buffie, Edward F., 1992. "Stabilization policy and public sector prices," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 253-276, April.
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