Macroeconomic adjustment in IMF-supported programs

Projecting macroeconomic outcomes: Evidence from the IMF

“…Third, we would like to use the information on periodic revisions to projections provided in MONA to create a dynamic portrait of the convergence of IMF-staff projections to actual over time. In a related paper (Atoian et al 2004) we have reported our analyses of IMF staff revisions to its projections, using the methodology of Musso and Phillips (2002). These results indicate that the IMF staff learns from past projection errors and from new information.…”

“…Baqir et al (2005) extended this analysis through consideration of the IMF's simultaneous forecasts of intermediate policy targets: the optimism of Musso and Phillips, for example, was connected to the country's ability to implement ambitious policy targets. Atoian et al (2006) considered the IMF's forecast of current account and fiscal balance ratios to GDP, and discovered an optimistic bias in the fiscal balance ratio. Aldenhoff (2007) in this journal investigated IMF forecasts of economic growth, inflation and unemployment, and found them biased towards optimism; when considering forecasts of developing countries, he found a positive correlation between this optimism and net credit flows to the country.…”

“…Second, we consider the implicit dynamic macro time-series processes that have been used to generate the macroeconomic forecast and (separately) the observed macroeconomic outcomes for the participant countries. The previous cited research (with the exception of Atoian et al (2006)) has treated macroeconomic projection values as independent random variables. We go beyond that to model in a nonrestrictive form the auto-regressive time-series processes underlying both the projections and the observed variables.…”

“…2 SeeMusso and Phillips (2002),Atoian et al (2004), andBaqir et al (2005) for earlier studies of the unbiasedness and precision of IMF forecasts.3 We do not ask the related question: "Was the IMF able to predict the onset and spread of the current financial crisis?" in this paper Conway (2010).…”

“…We first used this decomposition inAtoian et al (2004). That remains a good introduction to the technique.Projecting macroeconomic outcomes: Evidence from the IMF…”