Abstract
Quarterly evidence on participation in IMF programs for the period 1974-2003 is examined statistically using the techniques of hazard analysis and error-correction estimation. Three hypotheses are proposed and tested, and the results support a “revolving door” explanation of participation in IMF programs. First, an increase in cumulative prior participation in IMF programs is found to cause a reduction on average in the length of a new spell of participation. Second, the length of time between participation spells is reduced significantly with an increase in cumulative prior participation in IMF programs. Third, the evolution of reserve adequacy is shown to be significantly and positively affected by participation in IMF programs. The results depict a revolving door to IMF participation, and for those countries with prior participation the door revolves more rapidly. This result is shown to depend critically upon the mix of countries considered. The increase in recidivism is a phenomenon most strongly observed among the least developed countries, while the reduction in duration is more strongly observed in the emerging and transition economies. These results are derived while controlling for country-specific unobserved heterogeneity, year-specific demand effects, external shocks, and pre-existing policy distortions.
Published Version
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