On the Determinants and Outcomes of IMF Loans in Low- and Middle-Income Countries: Do Politics Matter?

Jala Youssef and Chahir Zaki

Emerging Markets Finance and Trade, 2023, vol. 59, issue 9, 2834-2850

Abstract: The objective of this paper is to analyze the economic and political determinants of IMF loans in low- and middle-income countries and their impact on economic growth. Our contribution is threefold. First, we use the IMF Monitoring of Fund Agreements database along with international political economy factors to analyze IMF lending determinants through a Heckman two-stage selection procedure. Second, we use the predicted values of determinants of IMF lending to explain the consequences of this lending on growth. We also investigate how the domestic political regime of the recipient country would affect the outcomes of these loans. Third, we study the dynamic effects of IMF loans on economic growth using the local projection method. Our main findings show that economic and political proximity to the IMF major shareholders matter for the likelihood of obtaining an IMF non-concessional loan. Furthermore, most of the loans exert a negative effect on the trend component of GDP, confirming that such loans can stabilize the economies in the short term without improving the long-run steady growth. The analysis of the dynamic effects of loans also confirmed these findings. Finally, democratic regimes compared to autocratic ones improve the effects of these loans on economic growth.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2023.2199116 (text/html)
Access to full text is restricted to subscribers.

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:mes:emfitr:v:59:y:2023:i:9:p:2834-2850

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2023.2199116

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().