Economic Determinants of Fund Financial Arrangements

Julio Santaella and Malcolm Knight

No 1994/036, IMF Working Papers from International Monetary Fund

Abstract: This paper analyses empirically the economic factors that lead to approval of Fund financial arrangements. We account for both the economic variables that induce a country to seek an arrangement with the Fund ("demand-side" factors) and the macroeconomic policy commitments that the Fund considers when deciding whether to approve it ("supply-side" factors). Using a pooled sample of annual observations for 91 developing countries over 1973-1991, we obtain maximum likelihood estimates of bivariate and univariate probit equations to determine the probability of approval of a financial arrangement for a given country in a given year. A number of our chosen demand-side and supply-side variables are statistically significant determinants of the approval of a Fund arrangement, and the overall explanatory power of the equations is high.

Keywords: WP; Fund arrangement; exchange rate; balance of payments (search for similar items in EconPapers)
Pages: 48
Date: 1994-03-01
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