IMF-Supported Programs in Low Income Countries: Economic Impact over the Short and Longer Term

By Christian Mumssen, Yasemin Bal Gunduz, Christian H Ebeke, Linda Kaltani

December 31, 2013

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Christian Mumssen, Yasemin Bal Gunduz, Christian H Ebeke, and Linda Kaltani. IMF-Supported Programs in Low Income Countries: Economic Impact over the Short and Longer Term, (USA: International Monetary Fund, 2013) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies the short and longer-term impact of IMF engagement in Low-Income Countries (LICs) over nearly three decades. In contrast to earlier studies, we focus on a sample composed exclusively of LICs and disentangle the different effects of IMF longer-term engagement and short-term financing using a propensity score matching approach to control for selection bias. Our results indicate that longer-term IMF support (at least five years of program engagement per decade) helped LICs sustain economic growth and boost resilience by building fiscal buffers. Interestingly, the size of IMF financing has no significant impact on economic growth, possibly pointing to the prominent role of IMF policy advice and institutional capacity building in the context of longer-term engagement. We also present evidence that the short-term IMF engagement through augmentations of existing programs or short-term and emergency facilities is positively associated with a wide range of macroeconomic outcomes. Notably, the IMF financial support has the greatest impact on short-term growth when LICs are faced with substantial macroeconomic imbalances or exogenous shocks.

Subject: Balance of payments, Balance of payments need, Current account balance, Education spending, Expenditure, Foreign direct investment, Health care spending, Inflation, Prices

Keywords: Balance of payments need, Country, Current account balance, Economic growth, Financing, Foreign direct investment, GDP, Global, Health care spending, IMF arrangement, IMF engagement, IMF financial support face, IMF program dummy, IMF programs, IMF staff calculation, IMF support, Inflation, Longer-term IMF engagement, Low-income countries, Macroeconomic outcomes, Program engagement, Propensity score matching, WP

Publication Details

Pages:

64
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/273
Stock No:

WPIEA2013273
ISBN:

9781484356203
ISSN:

1018-5941

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