Chapter 3 Do IMF-Supported Programs Boost Private Capital Inflows? The Role of Program Size and Policy Adjustment
Author:
Roberto Benelli https://isni.org/isni/0000000404811396 International Monetary Fund

Search for other papers by Roberto Benelli in
Current site
Google Scholar Close
Language:
English
Print Publication Date:
03 Apr 2006
Keywords:
SEM; IMF program; country; IMF-supported program; program implementation; IMF effort; current account ratio; Current account; Capital flows; Private capital flows; Fiscal stance; Global; Sub-Saharan Africa; East Asia; Africa; Europe; program access; IMF arrangement; confidence level; IMF's staff; structural adjustment; Inflation; Fiscal consolidation; Capital inflows

Abstract

I analyze empirically whether program size (the size of financial assistance) and policy adjustment matter for the success of IMF-supported programs. I define a program as successful in boosting private capital flows if the initial program projections for net private capital flows are met or exceeded. I find that success is negatively associated with the size of financial assistance, especially in countries with market access, and that projection biases arising from binding constraints on the amount of IMF lending may account for this association. Moreover, policy adjustment seems to have a causal positive effect on the likelihood of program success.

Other IMF Content

Other Publishers Content

  • Collapse
  • Expand
Cover IMF-Supported Programs
IMF-Supported Programs
Recent Staff Research
ISBN:
9781589063617
Publication Date:
03 Apr 2006
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781589063617.072
Pages:
292

  • Barro, Robert J., and Jong-Wha Lee, 2002, “IMF Programs: Who Is Chosen and What Are the Effects?” NBER Working Paper No. 8951 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation

  • Basurto, Gabriela, and Atish R. Ghosh, 2000, “The Interest Rate-Exchange Rate Nexus in the Asian Crisis Countries,” IMF Working Paper 00/19 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Benelli, Roberto, 2003, “Do IMF-Supported Programs Boost Private Capital Inflows? The Role of Program Size and Policy Adjustment,” IMF Working Paper 03/231 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Berg, Andrew, Eduardo Borensztein, Ratna Sahay, and Jeromin Zettelmeyer, 1999, “The Evolution of Output in Transition Economies: Explaining the Differences,” IMF Working Paper 99/73 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Bird, Graham, and Dane Rowlands, 1997, “The Catalytic Effects of Lending by the International Financial Institutions,” World Economy, Vol. 20, No. 2, pp. 955–75.

    • Search Google Scholar
    • Export Citation

  • Bird, Graham, and Dane Rowlands, 2002a, “IMF Lending: How Is It Affected by Economic, Political and Institutional Factors?” Policy Reform, Vol. 4, pp. 243–70.

    • Search Google Scholar
    • Export Citation

  • Bird, Graham, and Dane Rowlands, 2002b, “Do IMF Programmes Have a Catalytic Effect on Other International Capital Flows?” Oxford Development Studies, Vol. 30, No. 3, pp. 229–49.

    • Search Google Scholar
    • Export Citation

  • Bulíř, Aleš, and Soojin Moon, 2003, “Do IMF-Supported Programs Help Make Fiscal Adjustment More Durable?” IMF Working Paper 03/38 (Washington: International Monetary Fund). This paper also appears, in somewhat different form, as Chapter 14 in this volume.

    • Search Google Scholar
    • Export Citation

  • Chang, Roberto, and Andrés Velasco, 2000, “Liquidity Crises in Emerging Markets: Theory and Policy,” NBER Macroeconomics Annual 1999, ed. by Ben S. Bernanke and Julio Rotemberg (Cambridge, Massachusetts: MIT Press).

    • Search Google Scholar
    • Export Citation

  • Corsetti, Giancarlo, Bernardo Guimarães, and Nouriel Roubini, 2003, “The Trade-Off Between an International Lender of Last Resort to Deal with Liquidity Crises and Moral Hazard Distortions: A Model of the IMF’s Catalytic Finance Effect,” NBER Working Paper No. 10125 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation

  • Cottarelli, Carlo, and Curzio Giannini, 2002, “Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending,” IMF Working Paper 02/193 (Washington: International Monetary Fund). This paper also appears, in somewhat different form, as Chapter 12 in this volume.

    • Search Google Scholar
    • Export Citation

  • Dell’Ariccia, Giovanni, Isabel Schnabel, and Jeromin Zettelmeyer, 2002, “Moral Hazard and International Crisis Lending: A Test,” IMF Working Paper 02/181 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Dicks-Mireaux, Louis, Mauro Mecagni, and Susan Schadler, 2000, “Evaluating the Effect of IMF Lending to Low-Income Countries,” Journal of Development Economics, Vol. 61 (April), pp. 495–525.

    • Search Google Scholar
    • Export Citation

  • Edison, Hali, Michael Klein, Luca A. Ricci, and Torsten M. Sløk, 2002, “Capital Account Liberalization and Economic Performance: Survey and Synthesis,” IMF Working Paper 02/120 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Edwards, Martin S., 2000, “Reevaluating the Catalytic Effects of IMF Programs,” paper presented at the Annual Meeting of the American Political Science Association, Washington, September.

    • Search Google Scholar
    • Export Citation

  • Eichengreen, Barry, and Ashoka Mody, 2001, “Bail-Ins, Bailouts, and Borrowing Costs,” Staff Papers, International Monetary Fund, Vol. 47, Special Issue, pp. 155–87.

    • Search Google Scholar
    • Export Citation

  • Fischer, Stanley, 1993, “The Role of Macroeconomic Factors in Growth,” Journal of Monetary Economics, Vol. 32, pp. 485–512.

  • Furman, Jason, and Joseph E. Stiglitz, 1998, “Economic Crises: Evidence and Insight from East Asia,” Brooking Papers on Economic Activity: 2, Brookings Institution, pp. 1–135.

    • Search Google Scholar
    • Export Citation

  • Ghosh, Atish, Timothy Lane, Marianne Schulze-Ghattas, Aleš Bulíř, Javier Hamann, and Alex Mourmouras, 2002, IMF-Supported Programs in Capital Account Crises, IMF Occasional Paper No. 210 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Haque, Nadeem Ul, and Mohsin S. Khan, 1998, “Do IMF-Supported Programs Work? A Survey of the Cross-Country Empirical Evidence,” IMF Working Paper 98/169 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • International Monetary Fund (IMF), 1993, Balance of Payments Manual, Fifth Edition (Washington: International Monetary Fund).

  • International Monetary Fund (IMF), 2003a, “Review of Access Policy Under the Credit Tranches and the Extended Fund Facility,” available on the Web at http://www.imf.org/external/np/tre/access/2003/011403a.htm.

    • Search Google Scholar
    • Export Citation

  • International Monetary Fund (IMF), 2003b, “Access Policy in Capital Account Crises—Modifications to the Supplemental Reserve Facility (SRF) and Follow-Up Issues Related to Exceptional Access Policy,” available on the Web at http://www.imf.org/external/np/tre/access/2003/pdf/011403.pdf.

    • Search Google Scholar
    • Export Citation

  • Knight, Malcolm, and Julio A. Santaella, 1997, “Economic Determinants of IMF Financial Arrangements,” Journal of Development Economics, Vol. 54, pp. 405–36.

    • Search Google Scholar
    • Export Citation

  • Kraay, Aart, 2003, “Do High Interest Rates Defend Currencies During Speculative Attacks?” Journal of International Economics, Vol. 59, pp. 297–321.

    • Search Google Scholar
    • Export Citation

  • Krueger, Anne O., 1998, “Whither the World Bank and the IMF?” Journal of Economic Literature, Vol. 36 (December), pp. 1983–2020.

  • Loungani, Prakash, 2000, “How Accurate Are Private Sector Forecasts—Cross-Country Evidence from Consensus Forecasts of Output Growth,” IMF Working Paper 00/77 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Marchesi, Silvia, 2003, “Adoption of an IMF Programme and Debt Rescheduling: An Empirical Analysis,” Journal of Development Economics, Vol. 70, pp. 403–23.

    • Search Google Scholar
    • Export Citation

  • Mody, Ashoka, and Diego Saravia, 2003, “Catalyzing Capital Flows: Do IMF Programs Work as Commitment Devices?” IMF Working Paper 03/100 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Morris, Stephen, and Hyun Song Shin, 1998, “Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks,” American Economic Review, Vol. 88, No. 3, pp. 587–97.

    • Search Google Scholar
    • Export Citation

  • Morris, Stephen, and Hyun Song Shin, 2003, “Catalytic Finance: When Does It Work?” (unpublished; New Haven, Connecticut: Yale University).

    • Search Google Scholar
    • Export Citation

  • Mussa, Michael, and Miguel Savastano, 1999, “The IMF Approach to Economic Stabilization,” IMF Working Paper 99/104 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Musso, Alberto, and Steven Phillips, 2001, “Comparing Projections and Outcomes of IMF-Supported Programs,” IMF Working Paper 01/45 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Przeworski, Adam, and James Raymond Vreeland, 2002, “The Effect of IMF Programs on Economic Growth,” Journal of Development Economics, Vol. 62, No. 2, pp. 385–421.

    • Search Google Scholar
    • Export Citation

  • Ramcharan, Rodney, 2003, “Assessing IMF Program Effectiveness” IMF Research Bulletin, Vol. 4 (June).

  • Rodrik, Dani, 1996, “Why Is There Multilateral Lending?” in Annual World Bank Conference on Development Economics 1995, ed. by M. Bruno and B. Pleskovic (Washington: World Bank).

    • Search Google Scholar
    • Export Citation

  • Rogoff, Kenneth, 2003, “The IMF Strikes Back,” Foreign Policy, Vol. 134 (January/February).

  • Zettelmeyer, Jeromin, 2000, “Can Official Crisis Lending Be Counterproductive in the Short Run?” Economic Notes, Vol. 29, No. 1, pp. 13–29.

    • Search Google Scholar
    • Export Citation

  • Zitzewitz, Eric, 2001, “Measuring Herding and Exaggeration by Equity Analysts and Other Opinion Sellers” (unpublished; Palo Alto, California: Stanford University).

    • Search Google Scholar
    • Export Citation