The Economic Impact of Short-term IMF Engagement in Low-Income Countries

Gündüz, Yasemin Bal

doi:10.1016/j.worlddev.2016.04.012

Cited by 13 publications

(9 citation statements)

References 48 publications

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“…An initial step in the matching procedure is to calculate the probability of participating in IMF-supported programs conditional on observable economic and political conditions, estimated via a probit model. 4 The next step entails generating matches of similar probabilities, or propensity scores, between pools of participating and nonparticipating observations, or country-years, to construct a control group (Atoyan and Conway 2006;Bal Gündüz 2016). For instance, if we assume that country selection is driven only by levels of foreign reserves, then we could match Uganda in 1981 with Tanzania in 1983.…”

Section: Matching Methodsmentioning

confidence: 99%

“…Several studies deploy matching methods to explore the impact of participation in IMF programs (Atoyan and Conway 2006;Bal Gündüz 2016;Garuda 2000;Hardoy 2003;Nelson and Wallace 2017). For instance, Hardoy (2003) uses nearest-neighbor 4 Matching by propensity score is the traditional and most popular approach, but alternative matching criteria include index scores or Mahalanobis metrics (Augurzky and Kluve 2007;King and Nielsen 2018).…”

Section: Matching Methodsmentioning

confidence: 99%

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How to evaluate the effects of IMF conditionality

et al. 2018

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Following calls for a more disaggregated approach to studying the consequences of IMF programs, scholars have developed new datasets of IMF-mandated policy reforms, or 'conditionality.' Initial studies have explored how conditions have, inter alia, affected tax revenues, public sector wages, and health systems. Notwithstanding the important contributions of these studies, a methodological quandary arises as to how to quantitatively examine the effects of conditionality, as distinct from other aspects of IMF operations (e.g., credit, technical support, or aid and investment catalysis). In this article, we review and advance these methodological debates by developing an identification strategy for addressing the multiple endogenous components of IMF programs. We begin by surveying the main strategies for studying the effects of IMF programs: matching methods, instrumental variable approaches, system GMM estimation, and variants of Heckman estimators. We then adapt these methods for studying the effects of conditionality per se. Specifically, we utilize a compound instrumental variable design over a system of three equations to address sources of endogeneity related to, first, the IMF participation decision and, second, the conditions included within the program. In Monte Carlo simulations, we demonstrate that our approach is unbiased and performs better than alternatives on standard diagnostics across a range of scenarios. Finally, we apply these methods to investigate how IMF programs impact government education spending as a share of GDP on a sample of 132 developing countries for the period 1990 to 2014, finding exposure to an additional condition results in a 0.05 percentage point decline.

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Section: Matching Methodsmentioning

confidence: 99%

Section: Matching Methodsmentioning

confidence: 99%

How to evaluate the effects of IMF conditionality

et al. 2018

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“…Some previous studies deal with these issues by employing a version of Heckman ( 1979 ) two-step estimator or an instrumental variable approach (Przeworski and Vreeland 2000 ; Hardoy 2003 ; Barro and Lee 2005 ; Conway 2006 ; Jorra 2012 ). Other studies also use conventional matching methodologies (Mumssen et al 2013 ; Gündüz 2016 ).…”

Section: Methodsmentioning

confidence: 99%

IMF-Supported Programs and Sovereign Debt Crises

Balima

2021

IMF Econ Rev

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This paper studies the role of IMF-supported programs in mitigating the likelihood of subsequent sovereign defaults in borrowing countries. Using a panel of 106 developing countries from 1970 to 2016 and an entropy balancing methodology, we find that IMF-supported programs significantly reduce the likelihood of subsequent sovereign defaults. This finding is robust to different specifications of the entropy balancing and alternative identification strategies. Our results suggest that a country that signs a program with the IMF typically experiences a slight improvement in its sovereign credit rating and a decrease in both government debt-to-GDP and fiscal deficit-to-GDP during the program period compared to the period before. Supplementary Information The online version supplementary material available at 10.1057/s41308-021-00135-7.

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“…Matching approach attempts to explicitly construct a control group (see Bal-Gunduz 2016). At the first stage, a researcher estimates a model that explains countries' participation decisions via a set of observables and constructs propensity scores, a measure that reflects the likelihood of program participation for each country in a given period.…”

Section: Methodsmentioning

confidence: 99%

IMF programs and economic growth: A meta-analysis

Balima

Sokolova

2021

Journal of Development Economics

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We examine 994 estimates of the effects of IMF programs on economic growth as reported by 36 studies. The mean reported effect is positive, but the estimates vary widely. We use meta-regression analysis to disentangle sources of this variation, addressing model uncertainty with Bayesian Model Averaging and LASSO. We find that estimates vary systematically depending on data and methods employed by the researchers. Reported effects of IMF programs tend to be more positive for samples that include countries with high levels of institutional and economic development, when measured on longer horizons, estimated using more recent data or obtained with the propensity score matching technique. Estimates appear to depend on the types of IMF programs being considered, as general resource programs tend to result in less favorable growth outcomes compared to programs that lend from concessional resources. Authors with IMF affiliation tend to report estimates that are somewhat higher than those of outside researchers.

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The Economic Impact of Short-term IMF Engagement in Low-Income Countries

Cited by 13 publications

References 48 publications

How to evaluate the effects of IMF conditionality

How to evaluate the effects of IMF conditionality

IMF-Supported Programs and Sovereign Debt Crises

IMF programs and economic growth: A meta-analysis

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