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© 2022 International Monetary Fund WP/22/261
IMF Working Paper
Finance Department
The Impact of the IMF’s COVID-19 Support to Developing and Emerging Economies
Prepared by Sumin Chun, Karmen Naidoo and Nelson Sobrinho*
Authorized for distribution by Charleen Gust
December 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: We construct a high-frequency dataset that combines information on all IMF lending and proxies of monthly economic activity during the first two years of the COVID-19 pandemic (2020–21). Using this novel dataset and standard econometric techniques we find a positive and significant marginal effect of IMF financing on economic activity in low-income countries (LICs) and emerging market economies. We also present tentative evidence that IMF financing may have helped economic outcomes by easing fiscal budget constraints, allowing for larger government spending in response to the pandemic. Overall, this evidence suggests that IMF financing helped lessen the negative impacts of the pandemic on economic activity, especially in LICs.
RECOMMENDED CITATION: Chun, S., K. Naidoo, and N. Sobrinho. 2022. “The Impact of the IMF’s COVID-19 Support to Developing and Emerging Economies.” IMF Working Paper WP/22/XX, International Monetary Fund, Washington D.C.
| JEL Classification Numbers: | C5, E6, F3, H0, I1 |
| Keywords: | COVID-19 pandemic; External financing; Emerging economies; Developing countries; IMF lending; Economic recovery; Nighttime lights; Mobility |
| Author’s E-Mail Address: | sumin.chun@duke.edu, knaidoo2@imf.org, nsobrinho@imf.org |
| JEL Classification Numbers: | C5, E6, F3, H0, I1 |
| Keywords: | COVID-19 pandemic; External financing; Emerging economies; Developing countries; IMF lending; Economic recovery; Nighttime lights; Mobility |
| Author’s E-Mail Address: | sumin.chun@duke.edu, knaidoo2@imf.org, nsobrinho@imf.org |
Title Page
WORKING PAPERS
The Impact of the IMF’s COVID-19 Support to Developing and Emerging Economies
Prepared by Sumin Chun, Karmen Naidoo and Nelson Sobrinho1
Contents
GLOSSARY
EXECUTIVE SUMMARY
INTRODUCTION
METHODOLOGY AND DATA
Methodology
Data
DESCRIPTIVE ANALYSIS
IMF Lending
High-Frequency Indicators
REGRESSION RESULTS
Baseline Findings
Cross-Country Heterogeneity
A Possible Fiscal Transmission Channel
Robustness Analysis
CONCLUSION
ANNEX I. DATA
Monthly Indicator of Economic Activity
ANNEX II. ADDITIONAL DESCRIPTIVE ANALYSIS
ANNEX III. ADDITIONAL REGRESSION ANALYSIS
Including country group-specific controls
Alternative timing of disbursement: IMF financing in April–June 2020
Scaling the treatment variable
Alternative definition of the treatment: IMF Commitments
Clustered standard errors
Alternative Financing Type: Emergency financing only
REFERENCES
FIGURES
1: GDP Per Capita Across Funded and Unfunded Countries, 2019 U.S. Dollars
2: IMF Lending—Number of Disbursements (Top Panel) and Amounts Disbursed (Bottom Panel), 2020–2022
3: IMF Lending by Facility—Number of Disbursements (Top Panel) and Amount Disbursed (Bottom Panel), 2020–2022
4: Country-Level Pandemic-Related Lending by the IMF and Other IFIs, 2020–2021
5: Annual GDP Growth, 2020–2021
6: Mobility at Retail and Recreation Spaces and Transit Stations in Funded vs. Unfunded Countries (Percent change from baseline Jan–Feb 2020)
7: Nighttime Lights Index, Funded vs. Unfunded Countries, 01/19–01/22 (Index, 2019=100)
8: Economic Activity Index in Funded vs. Unfunded Countries, 01/19–01/22 (Index, 12/2016=100) 9: Annual Current Government Spending for Funded and Unfunded Countries
TABLES
1: Countries that Received Pandemic-Related Support and Control Group, 2020–2021
2: Elasticities of Economic Activity with respect to High-Frequency Proxies
3: Sample Summary Statistics
4: Impact of IMF Lending on Mobility
5: Impact of IMF Lending on Nighttime Lights
6: Impact of IMF Lending on Economic Activity Index
7: Heterogeneity: Mobility and Nighttime Lights
8: Heterogeneity: Economic Activity Index
9: Heterogeneity: IMF Concessional vs. Non-concessional Lending
10: Government COVID-Related Fiscal Spending
Glossary
| CCRT | Catastrophe Containment and Relief Trust |
| CSIS | Center for Strategic and International Studies |
| DNB | Day Night Band |
| DOTS | Direct of Trade Statistics |
| DSBB | Dissemination Standards Bulletin Board |
| DSSI | Debt Service Suspension Initiative |
| ECF | Extended Credit Facility |
| EFF | Extended Fund Facility |
| EMEs | Emerging Market Economies |
| FE | Fixed Effects |
| GDP | Gross Domestic Product |
| GRA | General Resources Account |
| ICT | Information and Communications Technology |
| IFIs | International Financial Institutions |
| IFS | International Financial Statistics |
| IMF | International Monetary Fund |
| LICs | Low-Income Countries |
| MDBs | Multilateral Development Banks |
| PRGT | Poverty Reduction and Growth Trust |
| RCF | Rapid Credit Facility |
| RFI | Rapid Financing Instrument |
| SBA | Stand-By Arrangement |
| SCF | Standby Credit Facility |
| SDR | Special Drawing Rights |
| TWFE | Two-Way Fixed Effects |
| UCT | Upper Credit Tranche |
| VI IRS | Visible and Infrared Imaging Suite |
| WB | World Bank |
| WGI | Worldwide Governance Indicators |
We thank Charleen Gust, Gilda Fernandez, Joseph Thornton, Olaf Unteroberdoerster, and the participants of the Finance Department Economist’s Group Seminar at the IMF for providing useful feedback. We also thank Chadi Abdallah, Bas B. Bakker, Gabriela Cugat, Flora Lutz, Marina Conesa Martinez, Ryota Nakatani, Mwanza Nkusu, Manasa Patnam, and Eyno Rots for their comments and suggestions provided on an earlier draft. Any remaining errors are ours.