IMPACT OF IMF-SUPPORTED PROGRAMS ON ECONOMIC SENTIMENTS: A MULTINOMIAL ORDERED PROBIT ANALYSIS ON TRANSITION ECONOMIES
Journal of International Commerce, Economics and Policy (JICEP), 2013, vol. 04, issue 01, 1-27
This paper analyses the effect of IMF-supported programs on economic agents' sentiment in transition countries. Using multinomial ordered probit models, we find that IMF-supported programs during periods of economic collapse reinforce underlying sentiments; they strengthen confidence in the future for those with an optimistic outlook and weaken sentiments for those with a weak outlook. This reflects the "confirmation bias", a tendency for individuals to prefer information that confirms their preconceptions. Once recovery is underway, IMF arrangements cease to be consequential for the outlook, implying that the biggest impact on sentiments occur during periods of great uncertainty and not during minor shocks.
Keywords: Transition; structural adjustment; international monetary fund; confirmation bias; E02; F3; P2 (search for similar items in EconPapers)
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