Projecting macroeconomic outcomes: Evidence from the IMF

In the process of designing IMF-supported programs, IMF staff members prepare projections of the evolution of key macroeconomic variables for the participating country. These projections are based on countries?? initial situations, and are conditioned on the implementation of reforms and policy measures agreed in the context of programs. In this paper, we examine the accuracy of projections in 291 programs approved in the period 1993?C2009. We focus on the projections of three macroeconomic variables (the ratios of the fiscal surplus to GDP and of external current account surplus to GDP, and real GDP growth) during the years immediately following the initiation of an IMF-supported program. We identify several potential reasons for divergence of projected from actual values: (i) mismeasured data on initial conditions; (ii) country-specific differences in forming projections, (iii) projections that do not reflect the dynamic time-series process of the actual data; (iv) policy forecast error; and (v) random errors in the actual data. Our data analysis suggests that the incomplete information on initial conditions and the country-specific differences in projection error are the largest contributors to discrepancies between projection and actual. We also consider whether the IMF??s forecasts have gotten more accurate in recent years; there is evidence that they have for the shortest horizons, but the quantitative impact on forecast error is small.     

Are IMF lending programs good or bad for democracy?

Have IMF lending programs undermined political democracy in borrowing countries? Building on the extensive literature on conditional lending, we outline several pathways through which IMF program participation might affect the levels of democracy in borrowing countries - including a new variant that suggests the possibility of a positive association between lending program participation and democracy scores. In order to test the argument we assemble annual data from 120 low- and middle-income countries observed (at maximum) in each year between 1971 and 2007. We use three strategies - genetic matching, instrumental variables, and difference-in-differences estimation - to better estimate the direction and size of the statistical association between participation in IMF lending programs and the level of democracy. We find evidence for modest but definitively positive conditional differences in the democracy scores of participating and non-participating countries.     

Adverse selection and growth under IMF programs

The dominant approach to studying the effects of IMF programs has emphasized moral hazard, but we find that adverse selection has more impressive effects. We propose a novel strategic selection model to study the growth effects of IMF programs, which allows for the possibility of adverse selection. We find that adverse selection occurs: the countries that are most interested in participating in IMF programs are the least likely to have favorable growth outcomes. Controlling for this selection effect, we find that countries benefit from IMF programs on average in terms of higher growth rates, but that some countries benefit from participation, while others are harmed. Moral hazard predicts that long-term users of Fund resources benefit least from participating in programs, while adverse selection predicts the opposite. Contrary to previous findings, we find that IMF programs have more successful growth performance among long-term users than among short-term users.     

东盟五国通货膨胀的福利成本研究

本文通过消费者剩余方法、补偿变量法和现金优先模型计算了东盟五国通货膨胀的福利成本。实证结果证明：5％的通货膨胀对东盟五国造成的福利损失都保持在总收入的0．01—0．5％之间,利用温和通胀来刺激经济发展的货币政策具备一定的可行性。但是当通胀率超过10％的时候,即恶性通胀发生以后,福利损失会成倍增长,通胀治理将成为货币政策当局的首要目标。     

The Effect of IMF Programs on Women’s Economic and Political Rights

Though much research has been devoted to the socioeconomic and political consequences of International Monetary Fund (IMF) programs for recipient countries, little is known about the impacts of these programs on the level of respect for women’s rights. We postulate that IMF-induced policy reforms of privatization and public spending cuts, and the growing political repression and instability following the implementation of IMF programs, undermine the government’s ability and willingness to protect women’s economic and political rights. To substantiate the theoretical claims, we combine data on women’s political and economic rights with data on IMF programs for the years 1981–2004. Our findings suggest that IMF involvement is likely to deteriorate the level of respect for women’s economic rights while having no discernible effect on women’s political rights. The results further indicate that the effect of these programs is not conditioned by political regime type and economic wealth of recipient countries. One major policy implication of our findings is that the IMF should start to recognize that the conditions attached to lending programs might be implemented at the expense of women’s economic rights and that more explicit protections of women’s rights need to be included in program negotiations.     

Out of the shadows or into the dark? Economic openness,IMF programs,and the growth of shadow economies

The existence of shadow economies is an important, yet understudied, issue for international political economy and development. This study examines how two distinct types of international economic engagement—economic openness and participation in International Monetary Fund (IMF) programs—affect the growth of shadow (informal) sectors. We theorize that increased economic openness will reduce the size of countries’ shadow sectors. More specifically, we posit that eliminating market-distorting trade barriers will decrease the incentives for shadow sector activities such as smuggling. Additionally, we posit that increased participation in global production and supply chains is likely to lead to a positive, “climb to the top” effect on states’ regulatory and labor policies that enhance the prospective benefits associated with formal sectors. Conversely, we argue that participation in IMF structural adjustment programs can lead to great shadow sector activity as IMF-imposed structural conditions might cause significant near-term economic hardship and degrade states’ regulatory capacity. The results from a panel of 145 countries from 1971 to 2012 indicate that economic openness reduces the size of the shadow economy, while participation in IMF programs is significantly related to a larger shadow economy. These findings have important implications for understanding how the divergent forms of international economic engagement might affect shadow economies.     

The activities of the institute

The debate on the role of the IMF in low-income countries has recently gained strength in light of the commitment by the international community to support achievement of the Millennium Development Goals by 2015. The IMF fulfils an important role as an information provider to low-income aid-recipient countries and their bilateral donors, who consider Fund signals as a useful device in their allocation decisions. The IMF also provides lending to low-income countries through the Poverty Reduction and Growth Facility (PRGF), established in 1999. The PRGF was designed to address earlier criticism claiming that IMF lending programs to low-income countries had privileged stabilisation over poverty-reducing growth through financial arrangements that had shown little ownership by those countries. The PRGF was meant to support a balanced macroeconomic framework in which low-income economies could pursue growth-enhancing measures with relevant poverty-reducing effects, reflecting policy priorities put forward by the countries themselves. Based on the available evidence, PRGF-supported countries have recorded a favourable growth performance vis-à-vis non-PRGF-supported countries, although the extent to which this outcome has translated into poverty reduction has yet to be assessed.     

改朝换代后的菲律宾经济：2011年回顾与展望

2011年是菲律宾阿基诺三世当选总统后完整执政的一年。在经历了2010年由选举推动的7．3％的高经济增长率后，菲律宾2011年的经济增长情况差强人意。本文从菲律宾实体经济、就业、通胀和贫困、货币金融政策与财政的视角考察了菲律宾2011年的经济增长与发展情况，介绍了菲律宾总统阿基诺三世上台之后采取的主要经济措施，并预测菲律宾2012年的经济发展前景及其制约因素。     

Is two better than one? The effects of IMF and World Bank interaction on growth

We estimate the impact on economic growth of the joint participation in both IMF and World Bank programs. More specifically, using panel data for 128 developing countries over the period 1982?C2005, and employing 2SLS to control for the possible endogeneity of participation in an IMF/World Bank program, we find that the interaction between these two organizations has a positive and significant impact on growth. The paper then opens up interesting new research questions related to investigate further on the effects of Bank?CFund simultaneous action and, to the extent to which their stronger impact on growth may depend on Bank?CFund interaction, also ways to optimize their joint effect through greater cooperation.     

International institutions and credible commitment of non-democracies

How do non-democratic countries credibly commit to policies in front of domestic and international audiences? Unlike democracies, non-democracies do not have functioning electoral systems and free presses to make their commitments costly thus credible. Yet, the need to credibly commit to a policy arises for non-democracies as well. In particular, when non-democratic leaders push for economic reforms, they need to coordinate the beliefs of domestic groups and attract international resources. How do non-democracies solve the commitment problem and succeed in achieving their policy goals? In this study, we argue that international institutions provide an important mechanism through which non-democratic countries could credibly signal their commitment to open economic policies. We test the argument with the involvement of IMF programs by post-communist countries from 1989 to 2005. We find that while IMF status is used as a credible commitment device for all countries, the effect is more significant for non-democracies.     

The effects of IMF programs on U.S. foreign direct investment in the developing world

Given the popular wisdom that the U.S. government influences IMF policies and tends to support the business community, it might be expected that IMF programs benefit U.S. firms abroad and thus borrower nations are attractive destinations for U.S. foreign direct investment (FDI). Surprisingly, no study has tested the impact of IMF loans on U.S. FDI. Controlling for common explanations in the literature, we use a treatment effects model and interviews with IMF staff researchers to investigate whether countries under different kinds of IMF programs receive more U.S. FDI than countries not under IMF arrangements. Using panel data for 126 developing countries from 1980 to 2003, we find that IMF borrowers tend to be more attractive to U.S. investors but not all IMF programs have the same effect. Our findings suggest that differences in loan duration, the extent of borrower input in policy decisions, and loan amounts affect borrowers’ leverage with the Fund and the U.S.     

Economic Sanctions and the Politics of IMF Lending

What effect do economic sanctions have on the IMF lending decisions? Though countries under economic sanctions often face significant economic and financial difficulties, no comprehensive research to date has explored whether the IMF as a de facto lender of last resort intervenes in those countries in need. We posit that economic coercion is likely to hinder the target’s access to IMF credits as sanctioning (sender) countries are likely to use their political influence in the IMF to deny funds to the destabilized target economies. To assess the empirical merits of the hypothesis, we combine data on the IMF lending with the economic sanctions data for 120 emerging market economies from 1975 to 2005. Results indicate that target countries are less likely to receive IMF funds, especially when under sanctions by the United States and international institutions. Our findings contradict the conventional wisdom that the IMF is tasked with providing lifelines to member governments in need of help to ease their short-term balance of payment problems. Further, as much as IMF loans can be used as positive inducements to acquire a country’s strategic cooperation, we show that they might also be used by sender countries as a punishment tool against target countries to amplify the impact of sanctions regimes.     

Explaining IMF lending decisions after the Cold War

This paper empirically investigates the economic and political factors that affect a country??s likelihood to sign an arrangement with the IMF and the determinants of the financial size of such a program. Arguably the world and the global financial architecture underwent structural changes after the ending of Cold War and so did the role of the IMF. Hence, we update and extend the work of Sturm et al. (Economics and Politics 17: 177?C213, 2005) by employing a panel model for 165 countries that focuses on the post-Cold War era, i.e., 1990?C2009. Our results, based on extreme bounds analysis, suggest that some economic and political variables are robustly related to these two dimensions of IMF program decisions. Furthermore, we show that it is important to distinguish between concessional and non-concessional IMF loans.     

IMF program compliance: Aggregate index versus policy specific research strategies

Consensus has grown that the economic reform programs of the International Monetary Fund (IMF) have failed to promote economic development. There is little consensus about how IMF programs should be reformed, however, because we do not understand why IMF programs have failed. Some critics contend that the IMF’s austere policy conditions are inappropriate for most program-countries and cause economic crises to deepen. Other critics argue that the policy conditions are actually ignored, and the IMF program loan ends up subsidizing the bad policies that caused the economic crises in the first place. This debate begs the compliance question. Unfortunately, the study of IMF compliance is not straightforward. IMF agreements span many dimensions, and the dimensions vary from agreement to agreement. Even along one dimension, governments are not held to the same standard. Rather than look at aggregate measures of compliance, this article proposes a return to studying specific conditions as was done in the earliest studies on IMF compliance.      

The effects of the IMF on expropriation of foreign firms

This paper seeks to explain the determinants of foreign expropriation in the developing world. We argue that the International Monetary Fund (IMF) helps to reduce the likelihood of nationalization because of the direct leverage the Fund holds over borrowers, especially as expropriation is a blatant violation of international property rights. Using expropriation data from 1961 to 2006, and several different measures for the Fund, we find that countries under IMF agreements are less likely to nationalize foreign firms. We also show that the Fund’s influence is greatest when the IMF loan represents a larger share of the borrower country’s gross domestic product (GDP) as well as in countries with weaker political institutions. The takeaway is that IMF continues to influence policy choices in the developing world.     

Unpacking Autocracy: Political Regimes and IMF Program Participation

Why do some countries participate in IMF programs while others refuse to do so? We suggest an answer to the question by unpacking one side of the typical democracy–autocracy dichotomy. Specifically, we utilize the growing literature on the varieties of authoritarianism to develop an argument linking the different incentives and constraints that leaders in party-based, personalist, and military regimes face when considering whether to sign agreements with the IMF. Empirically, we demonstrate that distinguishing among autocracies uncovers important variations in the sensitivity of such regimes to the political costs incurred by IMF participation. Party-based autocracies, for instance, respond to both sovereignty costs and the benefits of program participation during severe economic crises. Personalist regimes, however, are not sensitive to the sovereignty costs incurred with IMF participation and thus only participate when doing so provides needed revenue during economic crises. The unique features of military juntas, by contrast, suggests that such regimes are not sensitive to either of these political costs and thus do not respond to economic crises in the same way as their autocratic counterparts.     

Who Can Reform the Labor Market? IMF Conditionality,Partisanship, and Labor Unions

Labor market reforms are critical for economic growth. Yet, they are politically contentious, and governments, more often than not, are faced with strong opposition from interest groups. Scholarly work shows that governments often rely on external intervention to implement politically difficult reforms. This is the case with the International Monetary Fund (IMF) that typically conditions its financing on the implementation of required reforms. Do borrowing governments benefit from IMF programs to overcome domestic opposition to reform by organized interests? Utilizing a unique new data set on IMF conditionality, I show that partisan and electoral concerns and domestic alliances strongly affect the implementation of labor market reforms, even when the IMF imposes them. When faced with increasing number of strikes, left-wing governments are more likely to implement labor market reforms than center/right-wing governments. However, the left is less likely than the center/right to fulfill its international commitments during election years when labor groups are militant. These findings highlight the left’s unique ability to form pro-reform coalitions and the IMF’s conditional role in removing domestic political opposition to reform. Counter-intuitively, right-wing governments still struggle to reform the labor market, even during economic crises and under IMF programs.     

Getting India Back to the Growth Turnpike: What Will It Take?

India’s real GDP growth has slipped substantially since the onset of the North Atlantic financial crisis (NAFC). There are questions as to whether growth can be revived back to the high growth phase of 2003–2008 in an environment of macroeconomic and financial stability. This article argues that returning India to a high growth turnpike is quite feasible but it will need much more focused attention to the revival of manufacturing and to accelerate investment in transport and infrastructure. The immediate priority is to achieve the kind of fiscal quality and low inflation level that was exhibited during 2003–2008, with focused attention to increasing efficiency and compliance in tax revenue collection Higher tax revenues can facilitate increases in public investment for the delivery of public goods and services, which then crowd in private investment. However, the task ahead will be more difficult now in view of the protracted slow-down in global economic growth and in global trade.     

The International Monetary Fund: A review of the recent evidence

A review of recent quantitative studies on the International Monetary Fund reveals that much of the conventional wisdom is incorrect. Recent studies have demonstrated a new degree of methodological rigor, have drawn more heavily upon insights from political science, and have asked a number of new questions. We review studies of participation in IMF programs, design of IMF conditionality, implementation and enforcement of IMF conditions, conventional program effects and catalytic effects. At every stage, we find substantial evidence of the influence of major IMF shareholders, of the Fund’s own organizational imperatives, and of domestic politics within borrowing countries. We conclude that very little is known with certainty about the effects of IMF lending, but that a great deal has been learned about the mechanics of IMF programs that will have to be taken into account in order to obtain unbiased estimates of those effects.

印度尼西亚：2012～2013年回顾与展望

2012年,印尼政治、经济延续了2011年的发展态势,政治社会形势总体稳定、党派斗争加剧、暴力冲突时有发生。在经济方面,在世界经济萎靡和疲软的环境下仍然保持了宏观经济的稳定、较低的通胀率和较高的经济增长率。2013年,印尼政府仍面临国内外政治经济形势的诸多不确定性,主要国际机构和印尼央行对2013年印尼的经济预期乐观,私人消费和投资仍将成为2013年经济增长的主要引擎。随着世界经济缓慢复苏以及主要贸易伙伴经济增长的提高,出口对经济增长的作用将好于2012年。