Abstract
This paper investigates the determinants behind persistent and prolonged stays under the International Monetary Fund (IMF) program and its effectiveness, using panel data consisting of 70 countries that have requested IMF support multiple times, during the period 1980–2018. By employing panel survival analysis, we conclude that weak economic indicators, e.g., current account deficit, high debt service ratio, low GDP, are the main reasons that force a country to reach out to the IMF support program. We further extend our analysis to investigate the effectiveness of the IMF program by dividing our sample into two groups, based on income level. To overcome the issue of endogeneity, we implement the panel instrumental two-stage least squares (2SLS) fixed-effect model. In the light of our analysis, we find a contemporaneous positive impact of the IMF fund program on the economic growth of upper middle-income countries, while, for low-income countries, its contemporaneous impact is insignificant, but becomes visible over time.
Highlights
The International Monetary Fund (IMF), established in 1948, is an independent international organization
In comparison to the existing literature, we use a different methodology to find determinants behind persistent stays under the Secondly, we explore the impact of IMF program on participating countries
Money supply is negatively associated with years under IMF program
Summary
The International Monetary Fund (IMF), established in 1948, is an independent international organization. The IMF is a cooperative of 190 member countries, working on a mission of providing financial assistance to member countries, when needed, to tackle balance-of-payment problems, restore stability, and sustainable economic growth (Bird and Rowlands 2017). To give hope to member countries by making financial resources temporarily available under adequate safeguards, thereby helping them to overcome balance-of-payment crises and prevent them implementing policies that are destructive to economic prosperity by associating conditionality measures with the fund program. Any member country experiencing financial trouble, whether rich, middleincome, or poor, can turn to the IMF for financing. To tackle current account deficits, the IMF offers several concessional and non-concessional instruments to its member countries
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