Economic determinants of IMF financial arrangements

Abstract

We analyze factors that lead to IMF approval of financial arrangements. We account for both economic variables that induce a country to seek an IMF arrangement (‘demand-side’ factors) and macroeconomic policy commitments that the IMF 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 bivariate and univariate probit estimates of the approval of an IMF arrangement for a given country in a given year. A number of demand-side and supply-side variables are statistically significant determinants of the approval of an IMF arrangement.