Selection Bias and the Output Costs of IMF Programs

Michael Hutchison

No 04-15, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: Questions over the role of the IMF in the economic development and adjustment in developing countries have been the topic of intensive research and debate in recent years. Although most studies find that participation in an IMF program helps facilitate balance of payments adjustment, research in this area almost uniformly finds that growth is reduced at the same time (e.g. Bordo and Schwartz, 2000; Przeworski and Vreeland, 2000). In this paper we emphasize that the evaluation of the benefits and costs of participating in IMF-sponsored stabilization programs is complicated by the fact that countries typically enter into an agreement with the IMF only when facing dire economic problems. We argue that the sample selection bias is mainly responsible for the common perception that real output growth declines because countries choose to participate in IMF programs. This article uses four recently developed “matching” statistical methods (e.g. Heckman et al., 1997 and 1998; Rubin and Thomas, 1992; and others), based on the “selection on observables” bias, to estimate the growth effects of IMF program participation. In contrast with the extant literature, none of the matching method results (nearest neighbor, strata, radius and regression-adjusted) find an adverse growth effect. Rather, there is some evidence of a positive impulse to economic growth when countries entering IMF programs are compared to the appropriate counter-factual (i.e. non-participating countries with similar characteristics).

JEL-codes: E63 F34 F41 O19 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2004-06
New Economics Papers: this item is included in nep-dev and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://web.econ.ku.dk/epru/files/wp/wp-04-15.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://web.econ.ku.dk/epru/files/wp/wp-04-15.pdf [301 Moved permanently]--> https://web.econ.ku.dk/epru/files/wp/wp-04-15.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:epruwp:04-15

Access Statistics for this paper

More papers in EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics �ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().