The catalytic role of IMF programs to Low Income Countries

Alessandro Schiavone () and Claudia Maurini ()
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Alessandro Schiavone: Bank of Italy
Claudia Maurini: Bank of Italy

No 782, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper investigates whether IMF programmes have had a catalytic effect on flows of development aid to low-income countries (LICs) between 2002 and 2019. We use an entropy balancing methodology to obtain correct estimates, taking account of the characteristics of the countries assisted by the IMF. The findings suggest that IMF programmes catalyse development aid to LICs and, according to our baseline estimates, for each year of programme activity this catalytic effect amounts to 1.6 per cent of the GDP of assisted LICs. These findings apply to both multilateral and bilateral donors. However, the effect is significantly smaller for countries that fail to fulfil the IMF conditionality by not meeting the quantitative performance criteria subject to programme review. Official donors, especially multilateral ones, adopt a selective approach, allocating more development aid to relatively poorer, more institutionally reliable, and more politically stable countries.

Keywords: International Monetary Fund; catalysis; official development assistance (ODA) (search for similar items in EconPapers)
JEL-codes: F33 F35 F53 F63 O19 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-inv
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_782_23

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