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Can the IMF's Medium-Term Growth Projections Be Improved?

  • Juan Zalduendo
  • Catia Batista

Numerous reports have noted that the IMF's medium-term growth projections are overly optimistic, raising questions as to how these can be improved. To this end, we estimate a growth model and examine its out-of-sample forecasting properties relative to those of IMF projections. The model's projections outperform those of the IMF in all regions and among most income groups-projections are less biased (one-quarter of the IMF bias) and have smaller standard errors (20 percent lower root mean squared errors) even after controlling for the IMF's macroeconomic assumptions. The paper does not attempt to address the criticisms that have been leveled against the empirical growth literature, but the results suggest that benefits can be derived from bringing systematic analysis to bear on cross-country information.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/203.

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Length: 31
Date of creation: 01 Oct 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/203
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  1. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  2. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
  3. Dan Ben-David & David H. Papell, 1997. "Slowdowns and Meltdowns: Postwar Growth Evidence from 74 Countries," NBER Working Papers 6266, National Bureau of Economic Research, Inc.
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  6. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  7. Alberto Musso & Steven Phillips, 2002. "Comparing Projections and Outcomes of IMF-Supported Programs," IMF Staff Papers, Palgrave Macmillan, vol. 49(1), pages 3.
  8. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  9. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  10. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
  11. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  12. William Easterly & Michael Kremer & Lant Pritchett & Lawrence H. Summers, 1993. "Good Policy or Good Luck? Country Growth Performance and Temporary Shocks," NBER Working Papers 4474, National Bureau of Economic Research, Inc.
  13. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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