The IMF Research Bulletin, a quarterly publication, selectively summarizes research and analytical work done by various departments at the IMF, and also provides a listing of research documents and other research-related activities, including conferences and seminars. The Bulletin is intended to serve as a summary guide to research done at the IMF on various topics, and to provide a better perspective on the analytical underpinnings of the IMF’s operational work.
Summary by Rodney Ramcharan
The Macroeconomic Studies Division of the IMF’s Research Department organized a workshop on the macroeconomic challenges facing low-income countries on October 23–24. IMF and academic-researchers discussed their ongoing work on macroeconomic policies, IMF programs, aid, market access, debt, and growth. The program and papers are available at http://www.imf.org/external/np/res/seminars/2003/lic/index.htm. The following papers were presented at the workshop.
The Consistency of IMF Programs
Reza Baqir (IMF), Rodney Ramcharan (IMF), and Ratna Sahay (IMF)
The objectives on growth, inflation, and the current account are jointly met in only 8 percent of IMF programs. While growth objectives are more likely to be achieved if the fiscal targets are met, there appears to be a conflict in meeting the net foreign assets and growth objectives.
Political Foundations of the Resource Curse
Thierry Verdier (Delta), James Robinson (UC-Berkley), and Ragnar Torvik (NUST)
Why do resource windfalls lead to worse economic performance? Resource booms provide politicians with more resources to influence the outcome of elections and distort resource allocations. However, the overall impact on economic outcomes depends on the strength of domestic institutions.
Sovereign Borrowing by Developing Countries: What Determines Market Access?
Gaston Gelos (IMF), Ratna Sahay (IMF), and Guido Sandleris (Columbia University)
Why do some countries never have market access, others sometimes, and the rest always? Traditional measures of a country’s global links are not as important as vulnerability to shocks and the quality of policies and institutions in explaining market access.
New Data, New Doubts: Revisiting Aid, Policies, and Growth
William Easterly (NYU), Ross Levine (University of Minnesota), and David Roodman (Center for Global Development)
The influential finding by Burnside and Dollar (2000) that aid in the presence of good policies is associated with higher growth rates is questioned and found not to be robust to the inclusion of more recent data.
Macroeconomics and Inequality
Humberto Lopez (World Bank)
Improving education and infrastructure and lowering inflation leads to both higher growth and lower income inequality. Financial development, trade openness, and decreases in the size of government also lead to faster growth, but they are associated with higher inequality.
When Is Debt Sustainable?
Aart Kray (World Bank) and Vikram Nehru (World Bank)
The initial debt burden, the quality of polices and institutions, and shocks explain a substantial fraction of the cross-country and time-series variation in the frequency of debt distress.
Conditional Aid, Sovereign Debt, and Debt Relief
Tito Cordella (IMF), Giovanni Dell’Ariccia (IMF), and Ken Kletzer (UC-Santa Cruz)
Is debt relief the best instrument to increase the consumption by the poor in HIPC countries? Under the assumption that the preferences of the poor and donors are similar but differ from the recipient governments, donors could force recipient governments to redistribute to the poor by forgiving interest payments but keeping the stock of debt as leverage.
Is There a Case for Sterilizing Aid Inflows?
Alessandro Prati (IMF), Thierry Tressel (IMF), and Ratna Sahay (IMF)
Large aid flows in the past have led to small real exchange rate appreciation, but the effects could be large if there was a substantial stepping up of aid. A theoretical model identifies the conditions under which preventing a real appreciation through sterilizing policies improves welfare.