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The Politics of IMF Forecasts

Axel Dreher, Silvia Marchesi and James Vreeland

No 124, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: Using panel data for 157 countries over the period 1999-2005 we empirically investigate the politics involved in IMF economic forecasts. We find a systematic bias in growth and inflation forecasts. Our results indicate that countries voting in line with the US in the UN General Assembly receive lower inflation forecasts. As the US is the Fund’s major shareholder, this result supports the hypothesis that the Fund’s forecasts are not purely based on economic considerations. We further find inflation forecasts are systematically biased downwards for countries with greater IMF loans outstanding relative to GDP, indicating that the IMF engages in “defensive forecasting.” Countries with a fixed exchange rate regime also receive low inflation forecasts. Considering the detrimental effects that inflation can have under such an exchange rate regime, we consider this evidence consistent with the Fund’s desire to preserve economic stability.

Keywords: IMF; Economic Forecasts; Political Influence (search for similar items in EconPapers)
JEL-codes: C23 D72 F33 F34 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2007-10, Revised 2007-10
New Economics Papers: this item is included in nep-afr, nep-cba, nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://repec.dems.unimib.it/repec/pdf/mibwpaper124.pdf First version, 2007 (application/pdf)

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Working Paper: The Politics of IMF Forecasts (2007) Downloads
Working Paper: The Politics of IMF Forecasts (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:124

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