Back Matter
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

Abstract

This is the second of a group of papers dealing with various aspects of Fund-supported adjustment Programs.

Selected Bibliography

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  • Bergsten, C. Fred and William R. Cline, “Trade Policy in the 1980s: An Overview,” in Trade Policy in the 1980s, edited by William R. Cline (Washington: Institute for International Economics, 1983).

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  • Bond, M., “Agricultural Responses to Prices in Sub-Saharan African Countries” (unpublished, Washington: International Monetary Fund, 1983).

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  • Brau, E., R.C. Williams, P.M. Keller, and M. Nowak, Recent Multilateral Debt Restructurings with Official and Bank Creditors, Occasional Paper No. 25 (Washington: International Monetary Fund, December 1983).

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  • Deppler, Michael C. and Duncan M. Ripley, “The World Trade Model: Merchandise Trade,” Staff Papers, International Monetary Fund (Washington), Vol. 25 (March 1978), pp. 147206.

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  • Glowacki, J. and K. Ruffing, “Developing Countries in Project LINK,” in Modelling the International Trans-mission Process, edited by J.A. Sawyer (Amsterdam: North-Holland Publishing Co., 1979).

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  • Goldstein, Morris and Mohsin S. Khan. “Income and Price Effects in Foreign Trade.” in Handbook of International Economics, Vol. 2, edited by Ronald W. Jones and Peter B. Kenen (Amsterdam: North-Holland, 1984: New York: Elsevier, 1984), pp. 10411105.

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  • Goldstein, Morris and Effects of Slowdown in Industrial Countries on Growth in Non-Oil Developing Countries. Occasional Paper No. 12 (Washington. International Monetary Fund, August 1982).

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  • Goldstein, Morris and Peter Montiel, “Evaluating the Effects of IMF Stabilization Programs: Some Methodological Pitfalls” (unpublished, Washington: International Monetary Fund, December 1985).

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  • Goreux, Louis M., Compensatory Financing Facility. IMF Pamphlet Series No. 34 (Washington: International Monetary Fund, 1980).

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  • Guitian, M., Fund Conditionality: Evolution of Principles and Practices, IMF Pamphlet Series No. 38 (Washington: International Monetary Fund, 1981).

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  • Havrylyshyn, Oli and Martin Wolf. Trade Among Developing Countries: Theory, Policy Issues, and Principal Trends. World Bank Staff Working Paper No. 479 (Washington. August 1981).

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  • Heckman, James J., “Sample Selection Bias as a Specification Error,” Econometrica, Vol. 47 (January 1979). pp. 15361.

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  • Helliwell, J. and T. Padmore. “Empirical Studies of Macroeconomic Interdependence.” in Handbook of Inter-national Economics, edited by Peter Kenen and R. Jones (Amsterdam: North-Holland Publishing Co., 1984).

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  • Hemphill, William L., “The Effect of Foreign Exchange Receipts on Imports of Less Developed Countries,” Staff Papers, International Monetary Fund (Washington), Vol. 21 (November 1974), pp. 63777.

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  • Hickman, Bert G. and V. Filatov, “A Decomposition of International Income Multipliers,” in Global Econometrics: Essays in Honor of Lawrence R. Klein, edited by F. Gerard Adams and Bert G. Hickman (Cambridge, Massachusetts: MIT Press, 1983), pp. 34067.

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  • Inter-American Development Bank, Commodity Export Prospects of Latin America (Washington: Inter-American Development Bank, March 1984).

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  • Isard, Peter, “The Price Effects of Exchange Rate Change,” in The Effects of Exchange Rate Adjustments, edited by P. Clark, et al. (Washington: U.S. Treasury, 1977).

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  • Khan, Mohsin, “Import and Export Demand in Developing Countries,” Staff Papers, International Monetary Fund (Washington), Vol. 21 (November 1974), pp. 67893.

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  • Khan, Mohsin, and Malcolm D. Knight, “Stabilization in Developing Countries: A Formal Framework,” Staff Papers, International Monetary Fund (Washington), Vol. 28 (March 1981), pp. 153.

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  • Killick, Tony, “IMF Stabilization Programs,” in The Quest for Economic Stabilization, edited by Tony Killick (London: Heinemann for Overseas Development Institute, 1984), pp. 183226.

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  • Kirmani, Naheed, Luigi Molajoni, and Thomas Mayer, “Effects of Increased Market Access on Exports of Developing Countries,” Staff Papers, International Monetary Fund (Washington), Vol. 31 (December 1984), pp. 66184.

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  • Larsen, F., J. Llewellyn, and S. Potter, “International Economic Linkages,” OECD Economic Studies, No. 1 (Autumn 1983), pp. 4492.

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  • Meltzer, Alan, “Notes on the Problem of International Debt” (unpublished, September 1983).

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  • Saunders, A., “An Examination of the Contagion Effect in the International Loan Market” (unpublished; Washington: International Monetary Fund, December 1983).

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  • Waelbroeck, Jean, “Regional Models of Developing Countries,” in Models of Project LINK, edited by Jean Waelbroeck (Amsterdam: North-Holland Publishing Co., 1976), pp. 397409.

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  • Weinberg, C., “Comparisons of Policies to Stimulate the World Economy,” in Modelling the International Trans-mission Process, edited by J.A. Sawyer (Amsterdam: North-Holland Publishing Co., 1979), pp. 12941.

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  • Whalley, John, “The North-South Debate and the Terms of Trade: An Applied General Equilibrium Approach,” Review of Economics and Statistics (Cambridge, Massachusetts), Vol. 66 (May 1984), pp. 22434.

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  • Williams, Richard, Peter Keller, John Lipsky, and Donald Mathieson, International Capital Markets: Developments and Prospects, Occasional Paper No. 23 (Washington: International Monetary Fund, July 1983).

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  • Williamson, John, The Lending Policies of the International Monetary Fund (Washington: Institute for International Economics, 1982).

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  • Winters, L. Alan, “Developing Countries' Manufactured Exports—Some Simple Models” (unpublished, Washington: World Bank, December 1984).

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  • World Bank, Price Prospects for Major Primary Commodities (unpublished, Washington: World Bank, December 1982).

  • World Bank, World Development Report 1984 (New York: Oxford University Press, 1984).

1

Since program periods do not coincide neatly with calendar years, a country was assigned to the program group in any year in which it had a Fund program for at least seven months. In this paper, a country is regarded as a program country only during the period of its Fund program.

5

An additional restriction is that in estimating the transmission effects of Fund-supported programs, it is not possible to give as much attention to oil exporting countries as to industrial ones. This reflects the fact that the oil exporting country bloc of practically all existing world trade models is not as developed as the industrial country bloc; in particular, real income of oil exporting countries is typically exogenous in these models.

6

This should not imply that the size and maturity structure of foreign debt is not of interest in Fund programs, or that some past multilateral bank debt rescheduling has not been contingent upon the country reaching agreement with the Fund on an adjustment program, or even that the Fund does not support rescheduling in cases where there is prior evidence of significant progress in adjustment. See Brau et al. (1983).

8

In this and all subsequent tables, program countries include only those for which data are available for the year in question. The occasional exclusion of some program countries for this reason should not qualitatively affect the conclusions.

9

As Guitian (1981) points out, forecasts are not targets, and in some cases targets will be set and announced with the intention of altering actual developments. Nevertheless, good targets usually have to incorporate good forecasts.

10

These differences are confirmed not only by t-tests for individual indicators but also by chi-squared tests for differences in the whole set of mean comparisons and by estimation of a linear discriminant function for systematic differences between the two groups.

11

Even if program countries were not screened by the Fund for a balance of payments need, program countries might still differ systematically from non-program countries because they were more or less motivated to adopt the adjustment measures specified in programs. Such “self-selection” as a barrier to control-group methodologies have been much discussed in the labor economics literature. See Heckman (1979).

12

Note that this problem would not be avoided by comparing changes in outcomes for program and non-program countries unless the changes were independent of the level of outcomes in the pre-program period; staff work suggests that this condition is unlikely to be satisfied in practice.

13

This suggests that if non-program countries are to be used as a control group for program countries, any pre-program differences that matter for subsequent performance would have to be held constant in the analysis. An alternative procedure would be to select a control group from the non-program population that does share the same characteristics as the program-country group. See Goldstein and Montiel, 1985.

14

The same problem has long been recognized in labor economics analysis of the effect of unionization on wages; see, for example, Lewis (1963). Specifically, if non-union firms set their wages high enough to deter their employees from joining unions, then a comparison of the mean wages of union and non-union firms may show no difference, even though unionization has actually affected the wages of both groups.

15

Even for program countries alone there are apt to be significant differences between the short-run and long-run effects of programs. In particular, the costs of adjustment are likely to be evident before the benefits, owing in large part to the downward stickiness of wages and prices, to the less-than-perfect mobility of factors of production in the short run, and to the difference between short-run and long-run price elasticities of demand for tradable goods.

16

The series of empirical studies done at the World Bank on the effects of outward-looking versus inward-looking policies is one example of this approach; see, for example, Balassa (1980).

17

See, for example, Khan and Knight (1981).

20

This conclusion, of course, applies to program countries as a group. There may be individual program countries where limited access to capital markets or the need to use additional financing to build up reserves resulted in a less discernible effect on imports.

21

To account for the possibility that the share of program countries in world trade could itself be affected by Fund programs, the calculation for 1983 was repeated using pre-program trade data for 1982. The results were qualitatively similar: Group A program countries then took 8 percent of world imports and 8 percent of world exports.

22

This finding mainly reflects the facts that most program countries are non-oil developing countries and that the United States and Japan send about twice as much of their total exports to this group as do the other five large industrial countries.

23

In 1960, for example, manufactures still accounted for roughly 60 percent of the total imports of non-oil developing countries. The major change between 1960 and 1980 is that the share of fuels doubled at the expense of food and other primary commodities; see Table 11, from the World Bank’s World Development Report 1983 (p. 168).

24

A comprehensive review of trade interdependence among program countries should also include export competition in third markets; this subject is considered in Section V.

25

In 1982, industrial countries took 55 percent of the exports and supplied 57 percent of the imports of non-oil developing countries.

26

In 1982, intra-developing country trade accounted for 25 percent of total exports and 19 percent of total imports of non-oil developing countries.

27

For example, see Meltzer (1983).

28

The debt figures for financial institutions only apply to guaranteed long-term debt.

30

The distinction between the influence of Fund-supported programs and that of program countries on global capital flows also applies, of course, beyond major borrowers. Fund-supported programs can help to stabilize the international financial system as private sector confidence is re-established when program countries adopt Fund policies, and as the Fund assists in multilateral debt-rescheduling operations, not only with commercial banks but also with official creditors. It is significant that Paris Club creditors require as a critical element in the process of debt negotiation the existence of a financial arrangement with the Fund in the relevant country.

31

Even with the efforts made by the Fund and national governments to maintain an adequate flow of financing to non-oil developing countries, lending to them fell from $43 billion in 1982 to $26 billion in 1983; more than half the growth of banks’ claims on these countries in 1983 was, moreover, in the form of coordinated lending to four Latin American countries and Yugoslavia in conjunction with bank debt restructurings and Fund-supported programs; see International Monetary Fund (1984). It is probably true, however, that the decline in lending to developing countries between 1982 and 1983 partly reflected lower demand for financing as they adjusted; the fall was not exclusively a supply constraint.

32

See Saunders (1983) for empirical evidence on the contagion effect in the international loan market.

33

The rate of growth in bank claims on non-oil developing countries, which averaged 25 percent a year during 1979–81, declined to less than 9 percent in 1982. Similarly, bank lending to non-oil developing countries in the Western Hemisphere fell from $30 billion in 1981 to $11 billion in 1982; see Williams et al. (1983), pp. 25–27. The fact that total private lending to non-oil developing countries has been so variable over time also casts doubt on the thesis that any program-induced increases in lending to program countries must come at the expense of less lending to non-program countries. The pool of private lending to these countries is not fixed (except in the very short run). In this connection, it is well to recognize that “contagion effects” can be positive as well as negative. For example, a recovery of confidence in, and lending to, program countries can also encourage lending to non-program countries.

34

Interest rates are not considered because program countries are best viewed as price takers in international capital markets.

35

Another indicator of the adjustment effort made by 1983 Group A program countries is their lower ratio of fiscal deficits to GNP, which was reduced from 4.1 percent in 1982 to 2.8 percent in 1983.

36

For all non-oil developing countries, real GNP growth in export markets averaged 1.3 percent in 1981–83 compared with 4.0 percent in 1976–80; see International Monetary Fund (1984), Table 14.

37

In fact, these figures conform rather closely to the actual situation of industrial countries, with 1983 exports to program countries accounting for about 7 percent of their total exports (see Table 7) and with total exports, in turn, representing roughly 15 percent of industrial-country GNP in the same year.

39

See, in this connection, Larsen et al. (1983).

40

Specifically, the share of exports in the GNP of industrial countries rose from about 8.5 percent in the late 1950s, to roughly 9.5 percent a decade later, and to some 15 percent by the late 1970s and early 1980s.

41

The Interlink model itself distinguishes eight separate non-OECD regions, three for oil-producing countries (covering the less absorptive, and more absorptive OPEC countries, and oil producing developing countries). The problem is therefore not with the model but only in the restrictiveness of the published simulation exercise to the problem at hand in this paper.

42

Differences between oil exporting and non-oil developing countries have led some researchers to build three-region world trade models (industrial countries, oil exporting developing countries, and non-oil developing countries).

43

In 1983, program countries sent 61 percent of their total exports to industrial countries and obtained 58 percent of their total imports from them; the corresponding figure for all non-oil developing countries was 57 percent for both exports and imports. As regards commodity composition, 1983 program-country exports were apportioned as follows in 1981: 44 percent for manufactures and 56 percent for primary commodities. The corresponding figures for all non-oil developing countries were 59 percent and 41 percent, respectively. On the import (for 1980 imports) side, the composition for program countries in 1983 was 61 percent manufactures, 22 percent fuels, and 17 percent other primary commodities and food; the comparable figures for non-oil developing countries were 68 percent, 15 percent, and 17 percent, respectively.

46

One reason these trade balance results from the two models are so similar is that two differences in the models tend to offset one another. The first difference concerns model coverage. Because the non-OECD region in the OECD model is much broader than the non-oil developing countries covered by the Fund’s model, the former permits less leakage from the trade multiplier than does the latter; for example, when imports by non-oil developing countries fall, only a fraction shows up as decreased industrial-country exports since other regions’ exports can also fall. Other things being equal, this difference in coverage leads to a smaller effect on the trade balance effect for industrial countries in the Fund’s World Trade Model (for the same size import shock). The second difference operates in the opposite direction. Because prices and output in the OECD model are endogenous, a trade shock produces feedback effects that moderate the original disturbance. For example, when industrial-country exports fall in response to a fall in non-OECD imports, so does the former’s income, and, in turn, its imports. This is not so in the Fund model because prices, income, and exchange rates are exogenous. This difference produces a smaller industrial-country trade balance effect in the OECD.

47

See, for example, Ridler and Yandle (1972), Belanger (1976), Clark (1977), Isard (1977), Feltenstein et al. (1979), Dell (1981), and Please (1984), as well as the staff study on “Exchange Rate Policies in Developing Countries,” SM/82/8.

48

The focus is on the effects of multilateral exchange rate changes on export prices and volumes because these variables are most often mentioned in the debate on the global effects of programs. It is well to keep in mind, however, that exchange rate adjustments can affect other variables as well (such as absorption).

49

Formal models of the determination of trade volumes and prices for the perfect and imperfect substitutes cases can be found in Goldstein and Khan (1984). Also, Feltenstein et al. (1979) contains a simple model of the world price effects of multilateral exchange rate action by primary-producing countries.

51

There are two different exchange rate scenarios here. In one case, all producers of the differentiated good change their exchange rates by the same amount. Then no one gets the competitive advantage he was seeking and the only result is presumably that nominal prices are high in all devaluing countries. The other scenario is where only some producers change their exchange rates. Here, while each devaluing producer gets less of an improvement in competitiveness than if he acted alone, the devaluing group as a whole still gains at the expense of others. This latter externality can be beneficial or harmful for the world economy depending on a host of factors, including the pre-devaluation external balances of the two groups.

52

Consistent with this proposition, where exporting has been continually unprofitable depreciation often induces a large increase in recorded exports of even price-inelastic commodities due to the induced decrease in smuggling.

53

In contrast, no such dramatic increase in the share of manufactures has occurred on the import side for developing countries; see World Bank (1984), Table 11.

54

Among non-energy primary commodities, the largest declines were in agricultural raw materials and in metals and minerals; the share of beverages and tobacco remained nearly constant while the share of food actually rose significantly.

55

See, for example, Goldstein and Khan (1984), Table 4.

56

In a recent study, Winters (1984) was unable to find significant relative price effects in several models of non-oil developing countries’ manufactured exports for the 1976–84 period, but attributes that result to “… poorly measured prices and the slightness of relative price changes compared to other shocks to the system,” not to low price elasticities themselves.

57

For an empirical analysis of how the structure of developing-country exports changes with the stages of development, see Balassa (1980).

58

See Bergsten and Cline (1983).

61

For an analysis of the problems, issues, and methods associated with quantifying protection, see Kirmani et al. (1984).

62

It should be mentioned that Whalley (1984) also finds that protection in the South carries large welfare costs; this occurs because, even though the South is relatively “small” in world trade, its ad valorem tariff rates are relatively high.

63

It is interesting to note that in Project LINK, commodity prices are similarly made a function of OECD real GNP, the price of OECD manufactures, and world production of the commodity; see Glowacki and Ruffing (1979).

64

The prices of non-oil primary commodities exported by non-oil developing countries fell by about 15 percent by 1981 and by roughly 13 percent in 1982; see International Monetary Fund (1984), Table 11.

65

The World Economic Outlook (International Monetary Fund, 1984) concludes: “… Changes in economic activity in the industrial countries, as measured by movements in their composite index of industrial production, appear to have been the most important factor affecting commodity prices both in the 1972–1977 cycle and subsequently.” (p. 139).

66

It is also relevant that exchange rate changes in program countries are typically made only when the exchange rate has become unrealistic and when alternative actions to exchange rate policy have already been considered and rejected.

67

However, the existence of the asymmetry in global current accounts makes the application of consistency checks across country groups more difficult, at least for balance of payments projections.

68

As an example of this sequencing, the number of stand-by and extended arrangement missions from July 1983 to June 1984 can be classified by month as follows: July (21), August (19), September (8), October (14), November (25), December (17), January (17), February (20), March (12), April (15), May (24), and June (21).

Occasional Papers of the International Monetary Fund*

2. Economic Stabilization and Growth in Portugal, by Hans O. Schmitt. 1981.

5. Trade Policy Developments in Industrial Countries, by S.J. Anjaria, Z. Iqbal, L.L. Perez, and W.S. Tseng. 1981.

6. The Multilateral System of Payments: Keynes, Convertibility, and the International Monetary Fund’s Articles of Agreement, by Joseph Gold. 1981.

7. International Capital Markets: Recent Developments and Short-Term Prospects, 1981, by a Staff Team Headed by Richard C. Williams, with G.G. Johnson. 1981.

8. Taxation in Sub-Saharan Africa. Part I: Tax Policy and Administration in Sub-Saharan Africa, by Carlos A. Aguirre, Peter S. Griffith, and M. Zühtü Yiicelik. Part II: A Statistical Evaluation of Taxation in Sub-Saharan Africa, by Vito Tanzi. 1981.

9. World Economic Outlook: A Survey by the Staff of the International Monetary Fund. 1982.

10. International Comparisons of Government Expenditure, by Alan A. Tait and Peter S. Heller. 1982.

11. Payments Arrangements and the Expansion of Trade in Eastern and Southern Africa, by Shailendra J. Anjaria, Sena Eken, and John F. Laker. 1982.

12. Effects of Slowdown in Industrial Countries on Growth in Non-Oil Developing Countries, by Morris Goldstein and Mohsin S. Khan. 1982.

13. Currency Convertibility in the Economic Community of West African States, by John B. McLenaghan, Saleh M. Nsouli, and Klaus-Walter Riechel. 1982.

14. International Capital Markets: Developments and Prospects, 1982, by a Staff Team Headed by Richard C. Williams, with G.G. Johnson. 1982.

15. Hungary: An Economic Survey, by a Staff Team Headed by Patrick de Fontenay. 1982.

16. Developments in International Trade Policy, by S.J. Anjaria, Z. Iqbal, N. Kirmani, and L.L. Perez. 1982.

17. Aspects of the International Banking Safety Net, by G.G. Johnson, with Richard K. Abrams. 1983.

18. Oil Exporters’ Economic Development in an Interdependent World, by Jahangir Amuzegar. 1983.

19. The European Monetary System: The Experience, 1979–82, by Horst Ungerer, with Owen Evans and Peter Nyberg. 1983.

20. Alternatives to the Central Bank in the Developing World, by Charles Collyns. 1983.

22. Interest Rate Policies in Developing Countries: A Study by the Research Department of the International Monetary Fund. 1983.

23. International Capital Markets: Developments and Prospects, 1983, by Richard Williams, Peter Keller, John Lipsky, and Donald Mathieson. 1983.

24. Government Employment and Pay: Some International Comparisons, by Peter S. Heller and Alan A. Tait. 1983. Revised 1984.

25. Recent Multilateral Debt Restructurings with Official and Bank Creditors, by a Staff Team Headed by E. Brau and R.C. Williams, with P.M. Keller and M. Nowak. 1983.

26. The Fund, Commercial Banks, and Member Countries, by Paul Mentre. 1984.

27. World Economic Outlook: A Survey by the Staff of the International Monetary Fund. 1984.

28. Exchange Rate Volatility and World Trade: A Study by the Research Department of the International Monetary Fund. 1984.

29. Issues in the Assessment of the Exchange Rates of Industrial Countries: A Study by the Research Department of the International Monetary Fund. 1984

30. The Exchange Rate System—Lessons of the Past and Options for the Future: A Study by the Research Department of the International Monetary Fund. 1984

31. International Capital Markets: Developments and Prospects, 1984, by Maxwell Watson, Peter Keller, and Donald Mathieson. 1984.

32. World Economic Outlook, September 1984: Revised Projections by the Staff of the International Monetary Fund. 1984.

33. Foreign Private Investment in Developing Countries: A Study by the Research Department of the International Monetary Fund. 1985.

34. Adjustment Programs in Africa: The Recent Experience, by Justin B. Zulu and Saleh M. Nsouli. 1985.

35. The West African Monetary Union: An Analytical Review, by Rattan J. Bhatia. 1985.

36. Formulation of Exchange Rate Policies in Adjustment Programs, by a Staff Team Headed by G.G. Johnson. 1985.

37. Export Credit Cover Policies and Payments Difficulties, by Eduard H. Brau and Chanpen Puckahtikom. 1985.

38. Trade Policy Issues and Developments, by Shailendra J. Anjaria, Naheed Kirmani, and Arne B. Petersen. 1985.

39. A Case of Successful Adjustment: Korea’s Experience During 1980–84, by Bijan B. Aghevli and Jorge Marquez-Ruarte. 1985.

40. Recent Developments in External Debt Restructuring, by K. Burke Dillon, C. Maxwell Watson, G. Russell Kincaid, and Chanpen Puckahtikom. 1985.

41. Fund-Supported Adjustment Programs and Economic Growth, by Mohsin S. Khan and Malcolm D. Knight. 1985.

42. Global Effects of Fund-Supported Adjustment Programs, by Morris Goldstein. 1986.

43. International Capital Markets: Developments and Prospects, by Maxwell Watson, Donald Mathieson, Russell Kincaid, and Eliot Kalter. 1986.

International Monetary Fund, Washington, D.C. 20431, U.S.A.

Telephone number 202 473 7430

Cable address: Interfund

* Numbers 1, 3, 4, and 21 of the Occasional Paper series are out of print.

  • Anjaria, S.J., Z. Iqbal, N. Kirmani, and L.L. Perez, Developments in International Trade Policy, Occasional Paper No. 16 (Washington: International Monetary Fund, November 1982).

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    • Export Citation
  • Balassa, Bela, The Process of Industrial Development and Alternative Development Strategies, Essays in International Finance No. 141 (Princeton, New Jersey: Princeton University, December 1980).

    • Search Google Scholar
    • Export Citation
  • Bélanger, Gérard, “An Indicator of Effective Exchange Rates for Primary Producing Countries,” Staff Papers, International Monetary Fund (Washington), Vol. 23 (March 1976), pp. 11336.

    • Search Google Scholar
    • Export Citation
  • Bergsten, C. Fred and William R. Cline, “Trade Policy in the 1980s: An Overview,” in Trade Policy in the 1980s, edited by William R. Cline (Washington: Institute for International Economics, 1983).

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    • Export Citation
  • Bond, M., “Agricultural Responses to Prices in Sub-Saharan African Countries” (unpublished, Washington: International Monetary Fund, 1983).

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