The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper analyses empirically the economic factors that lead to approval of Fund financial arrangements. We account for both the economic variables that induce a country to seek an arrangement with the Fund ("demand-side" factors) and the macroeconomic policy commitments that the Fund considers when deciding whether to approve it ("supply-side" factors). Using a pooled sample of annual observations for 91 developing countries over 1973-1991, we obtain maximum likelihood estimates of bivariate and univariate probit equations to determine the probability of approval of a financial arrangement for a given country in a given year. A number of our chosen demand-side and supply-side variables are statistically significant determinants of the approval of a Fund arrangement, and the overall explanatory power of the equations is high.