IMF lending and firm investment decisions

Pietro Bomprezzi, Silvia Marchesi and Rima Turk-Ariss

Economics Letters, 2025, vol. 253, issue C

Abstract: This paper investigates the dynamic aggregate response of firm investments to the approval of an IMF arrangement, distinguishing between General Resource Account (GRA) and Poverty Reduction and Growth Trust (PRGT). Using a stacked difference-in-differences estimator and leveraging firm-level characteristics, we find that firms relying more on external finance, those more exposed to uncertainty, or those with domestic ownership tend to increase investments significantly following a GRA agreement. In contrast, the effect is much more limited in the case of PRGT financed programs. The results contribute to the growing literature on the channels through which IMF programs influence the real economy, offering nuanced insights into how these interventions shape private sector dynamics and broader economic development.

Keywords: IMF; Firm investment; Financial frictions; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: E22 F34 O19 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:253:y:2025:i:c:s0165176525002198

DOI: 10.1016/j.econlet.2025.112382

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