The Revolving Door: Duration and Recidivism in IMF Programs

Abstract

Quarterly evidence on participation in IMF programs for the period 1974-2003 is examined using the techniques of hazard analysis and error-correction estimation. Three hypotheses are proposed and tested. An increase in cumulative prior participation in IMF programs is found to cause a reduction on average in the length of a new spell of participation. The length of time between participation spells is reduced significantly with an increase in prior participation in IMF programs. Reserve adequacy is shown to be significantly and positively affected by participation in IMF programs. The results support a "revolving door" explanation of participation in IMF programs. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

A quantitative model of sovereign debt, bailouts and conditionality

“…First, non-completion of IMF programs is widespread, see, e.g., Mussa and Savastano (2000) and Bird (2002). Second, as Bird et al (2004) and Conway (2007) point out, some member countries are recidivist borrowers, i.e., they tend to return frequently to the IMF. Third, and related to the second phenomenon, there is evidence on prolonged use of IMF resources calling the temporary nature of IMF lending into question (Bird et al (2004) and Conway (2007)).…”

“…Second, as Bird et al (2004) and Conway (2007) point out, some member countries are recidivist borrowers, i.e., they tend to return frequently to the IMF. Third, and related to the second phenomenon, there is evidence on prolonged use of IMF resources calling the temporary nature of IMF lending into question (Bird et al (2004) and Conway (2007)). Table 2 and figure 1 illustrate these empirical findings for some selected emerging market countries that had several default episodes.…”

“…In table 2 we follow Mussa and Savastano (2000) and view the fraction of IMF loans that is actually disbursed relative to the committed under each program as a proxy for completion. Using data provided by Conway (2007)…”

“…While over the past 40 years conditionality attached to IFI loans has become increasingly important and countries frequently utilized bailout programs, sovereign defaults occurred on a number of occasions, in particular in emerging market economies. 1 Empirical evidence indicates that some countries are recidivist borrowers who make repeated and prolonged use of official loans (Bird, Hussain and Joyce (2004), Conway (2007)). In addition, completion rates of conditional bailout arrangements are low (Mussa and Savastano (2000) and Bird (2002)).…”

ECONOMIC DETERMINANTS OF THE TIMING OF PREFERENTIAL TRADE AGREEMENT FORMATIONS AND ENLARGEMENTS

“…Joyce () and Conway () studied determinants of the lengths of spells of IMF programs. Besedes (), Besedes and Prusa (,), Fugazza and Molina (), Nitsch (), and Hess and Persson () all have studied the determinants of bilateral trade‐flow durations.…”