2015
DOI: 10.5089/9781513502342.001
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The Impact of IMF-Supported Programs on FDI in Low-income Countries

Abstract: It is common for IMF-supported adjustment programs with low-income member countries (LICs) to project that they will facilitate FDI inflows. The main objective of this paper is to empirically examine this hypothesis. Using an unbalanced panel dataset for 73 low-income countries over the period 1980-2012, and two different econometric methods that address the selection-bias problem, the empirical results robustly show that participating in IMF-supported program is associated with a significant increase in FDI i… Show more

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Cited by 3 publications
(5 citation statements)
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“…Specifically, Jensen (2004) reports that countries signing an IMF programme receive on average 25% less FDI inflows than countries not under an IMF programme, after controlling for selection into an IMF programme. More recent studies identify conditions under which IMF programmes serve as a catalyst: Al‐Sadiq (2015) reports that for low‐income countries, participation in IMF programmes is associated with a significant increase in FDI inflows. Biglaiser and DeRouen (2010) find that IMF borrowers tend to become more attractive only to U.S. investors.…”
Section: Empirical Studies Of Catalytic Financementioning
confidence: 99%
See 1 more Smart Citation
“…Specifically, Jensen (2004) reports that countries signing an IMF programme receive on average 25% less FDI inflows than countries not under an IMF programme, after controlling for selection into an IMF programme. More recent studies identify conditions under which IMF programmes serve as a catalyst: Al‐Sadiq (2015) reports that for low‐income countries, participation in IMF programmes is associated with a significant increase in FDI inflows. Biglaiser and DeRouen (2010) find that IMF borrowers tend to become more attractive only to U.S. investors.…”
Section: Empirical Studies Of Catalytic Financementioning
confidence: 99%
“…The connection between IMF programmes and FDI seems a logical extension of the link between IMF programmes and debt rescheduling or some other portfolio investment. When a country participates in an IMF programme that includes both IMF financial resources and economic and institutional reform policies aiming to stabilise macroeconomic indicators and to address structural constraints to economic growth, the participating country's prospects for economic recovery and policy reforms for better business environment should, in principle, improve, encouraging investors to embark on longer-term investment projects (Al-Sadiq, 2015). As long as the close link between an IMF programme and ensuing reforms holds, IMF programmes should stimulate FDI, reasonably assuming that investors seek a more advantageous business environment provided by implementation of IMF programme led policy reforms.…”
Section: Theoretical Underpinningsmentioning
confidence: 99%
“…Real GDP per Capita in LICs Relative to the US andOECD Members (1990-2015) .............................................................................................................. Table A1. The Determinants of Participation in IMF-Supported Programs, 1986-2015 ....... Table A2. Arellano-Bond GMM Estimates for the Long-Term Growth Effects of IMF-Supported Programs, 1986-2015 ©International Monetary Fund.…”
Section: List Of Figuresmentioning
confidence: 99%
“…The Determinants of Participation in IMF-Supported Programs, 1986-2015 ....... Table A2. Arellano-Bond GMM Estimates for the Long-Term Growth Effects of IMF-Supported Programs, 1986-2015 ©International Monetary Fund. Not for Redistribution Table A3.…”
Section: List Of Figuresmentioning
confidence: 99%
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