ERF 27th Annual Conference
On the Determinants and Outcomes of IMF Loans: A Political Economy Approach
No.
ERF27_30
Publisher
ERF
Date
May, 2021
Topic
F5. International Relations, National Security, and International Political Economy
P1. Capitalist Systems
F3. International Finance
The main objective in this paper is to empirically analyze the economic and political determinants of IMF lending in low- and middle-income countries. Compared to the existing literature, our main contribution is twofold. First, using the IMF Monitoring of Fund Agreements (MONA) database, we merge domestic political and institutional factors with international political economy factors to analyze IMF lending determinants. Second, we use the predicted values of determinants of IMF lending as instruments to explain the consequences of this lending on economic outcomes. Our main findings show that economic and political proximity to the IMF major shareholders matter for the likelihood of obtaining an IMF non-concessional loan. Furthermore, most of the loans seem to exert either an insignificant or a negative effect on the trend component of GDP, pointing out to what extent such loans can stabilize the economies in the short term without improving the long run steady state. Yet, democratic regimes compared to autocratic ones improves the effects of these loans on economic growth and other outcomes (such as the current account and inflation). By contrast, structural variables (for instance investment and schooling) do not seem to be significantly affected by such loans.
Authors
Jala Youssef
PhD Candidate in Economics and a Teaching...
Research Fellows
Chahir Zaki
Chaired Professor of Economics, University of Orléans