IMF Policy Advice Research Articles

Designing Labor Market Institutions in Emerging Market and Developing Economies: A Review of Evidence and IMF Policy Advice

This paper reviews the state of theory and evidence on the design of labor market institutions in emerging markets and developing economies. Compared with advanced economies, these economies tend to have larger market failures, which creates a strong case for government intervention. But they also face larger risks of policy failures due to informality and limited administrative capacity. We draw specific implications from this tension for the design unemployment insurance, job protection legislation, minimum wages and wage bargaining systems. We then use text mining techniques to identify and review a decade of IMF recommendations in these areas for 30 emerging market and developing economies.

How healthy is a ‘healthy economy’? Incompatibility between current pathways towards SDG3 and SDG8

Abstract Background The link between health and the economy is well known. However, economic growth as measured in SDG8, continues to leave people behind and the funding gap for realizing SDG3 for good health and well-being remains vast. International financial institutions, i.e. the IMF, influence national policies in ways that may undermine the SDGs. We examine incoherencies between economic growth and health goals in Malawi, Uganda, and Tanzania. Methods We conducted qualitative research based on policy analysis. To analyse IMF policy advice in the three countries we reviewed relevant program documents, article IV consultation reports (2016-18) and literature on structural adjustment. We accessed health information from WHO and World Bank databases, and national policies. Results In all three countries, some indicators, e.g. infant and child mortality, improved, but others lag behind. Underfunding is a major cause for poor health and inequities. GDP increases (as a measure of economic growth) do not automatically translate to increases in health spending. Health expenditure from domestic public resources remains much lower than international thresholds. To achieve this level of spending domestically, GDP in these countries would require an unrealistic manifold increase. IMF policy advice and loan conditionality that focus on GDP growth and tight monetary and fiscal targets impair social spending, while suggested taxation measures are generally regressive. Conclusions The GDP-focused SDG8 can delay efforts towards the SDG3 if governments opt to focus on GDP growth without measures to equally distribute wealth and invest in social sectors, often under IMF's influence. Although the IMF has acknowledged the importance of social development, its policy advice still adheres to austerity, harming population health. To realize the SDGs everywhere, governments should abandon GDP growth as a policy objective, strive for equitable economic development and emphasise global co-operation. Key messages GDP increases do not automatically translate to an increase of health spending, partly a result of IMF structural adjustment programs and policy advice. To realize the SDGs everywhere, governments should abandon GDP growth as a policy objective and place more emphasis on SDG17 on global co-operation.

Text-Mining Imf Country Reports – An Original Dataset

This article introduces an original panel dataset based on the text of country reports by the International Monetary Fund. It consists of a total of 5561 Article IV consultation and program review documents, published between 2004 and 2018 on 201 countries. The text of these reports provide indications of the perceived policy weaknesses, economic risks, ongoing reforms and implemented or neglected policy advice. Thus the content of IMF reports are widely used in the economics, political science and IR literature. To our knowledge this is the first comprehensive dataset that aggregates these country reports. The paper gives a detailed account on the data acquisition and management process. To demonstrate and validate the dataset's application for research we present three validation exercises. We find that Article IV reports can indicate incoming institutional reforms, show changes in IMF policy advice over time and identify potential gains from recently discovered natural resources in certain cases. Taken together, this paper contributes an original dataset of IMF country reports and demonstrates how it can be a useful foundation for further research into the role of international financial institutions.

Patterns of distributive justice: social housing and the search for market dynamism in Amsterdam

Housing policy changes in the Netherlands have been in line with OECD and IMF policy advice to increase market dynamism by downsizing the large social rental sector. The impact of such policies on households, however, is rarely acknowledged. Therefore, in this article, distributive effects on social housing tenants in Amsterdam between 2004 and 2014 are evaluated against two standards for distributive justice: sufficiency and priority. These standards befit the policy aim to provide adequate (sufficient) housing for households with a certain need (priority). The analysis shows housing policies have amplified the impacts of the global financial crisis on households. The occurrence of sufficiency increased significantly until 2008, but decreased thereafter. In regards of the priority standard more households with a significant need benefitted from social housing after 2008. However, many of these households still do not meet the sufficiency threshold. While spatial patterns remained rather stable, the impact has been greater in the areas with already relatively low residual incomes.

How Do Member Countries Receive IMF Policy Advice

This paper applies state-of-the-art deep learning techniques to develop the first sentiment index measuring member countries’ reception of IMF policy advice at the time of Article IV Consultations. This paper finds that while authorities of member countries largely agree with Fund advice, there is variation across country size, external openness, policy sectors and their assessed riskiness, political systems, and commodity export intensity. The paper also looks at how sentiment changes during and after a financial arrangement or program with the Fund, as well as when a country receives IMF technical assistance. The results shed light on key aspects on Fund surveillance while redefining how the IMF can view its relevance, value added, and traction with its member countries.

How Do Member Countries Receive IMF Policy Advice: Results from a State-of-the-Art Sentiment Index

This paper applies state-of-the-art deep learning techniques to develop the first sentiment index measuring member countries' reception of IMF policy advice at the time of Article IV Consultations. This paper finds that while authorities of member countries largely agree with Fund advice, there is variation across country size, external openness, policy sectors and their assessed riskiness, political systems, and commodity export intensity. The paper also looks at how sentiment changes during and after a financial arrangement or program with the Fund, as well as when a country receives IMF technical assistance. The results shed light on key aspects on Fund surveillance while redefining how the IMF can view its relevance, value added, and traction with its member countries.

Back to Basics: The Great Recession and the Narrowing of IMF Policy Advice

This article contributes to the literature on the dynamics of change and continuity in the International Monetary Fund's (IMF's) policy paradigm. The IMF embarked on a process of “streamlining conditionality” during the 2000s, but many observers have argued that the IMF's policy paradigm from the 1990s remains intact. This article examines whether the scope of the IMF's policy advice to borrowers during the Great Recession narrowed in comparison to its advice to borrowers during the heyday of the Washington consensus in the 1980s and 1990s. The article uses qualitative content analysis to establish the frequency of a series of policy dialogue indicators in four sample sets of countries requesting IMF stand‐by arrangements over three decades. The evidence suggests that contemporary IMF policy advice to borrowers continues to stress the importance of fiscal consolidation, with reduced emphasis on promoting the structural economic reforms associated with the Washington consensus era.

IMF-Supported Programs in Low Income Countries: Economic Impact over the Short and Longer Term

This paper studies the short and longer-term impact of IMF engagement in Low-Income Countries (LICs) over nearly three decades. In contrast to earlier studies, we focus on a sample composed exclusively of LICs and disentangle the different effects of IMF longer-term engagement and short-term financing using a propensity score matching approach to control for selection bias. Our results indicate that longer-term IMF support (at least five years of program engagement per decade) helped LICs sustain economic growth and boost resilience by building fiscal buffers. Interestingly, the size of IMF financing has no significant impact on economic growth, possibly pointing to the prominent role of IMF policy advice and institutional capacity building in the context of longer-term engagement. We also present evidence that the short-term IMF engagement through augmentations of existing programs or short-term and emergency facilities is positively associated with a wide range of macroeconomic outcomes. Notably, the IMF financial support has the greatest impact on short-term growth when LICs are faced with substantial macroeconomic imbalances or exogenous shocks.

Fiscal Regimes for Extractive Industries—Design and Implementation

Better designed and implemented fiscal regimes for oil, gas, and mining can make a substantial contribution to the revenue needs of many developing countries while ensuring an attractive return for investors, according to a new policy paper from the International Monetary Fund. Revenues from extractive industries (EIs) have major macroeconomic implications. The EIs account for over half of government revenues in many petroleum-rich countries, and for over 20 percent in mining countries. About one-third of IMF member countries find (or could find) resource revenues “macro-critical” – especially with large numbers of recent new discoveries and planned oil, gas, and mining developments. IMF policy advice and technical assistance in the field has massively expanded in recent years – driven by demand from member countries and supported by increased donor finance. The paper sets out the analytical framework underpinning, and key elements of, the country-specific advice given. Also available in Arabic: ????? ??????? ?????? ???????? ???????????: ??????? ???????? Also available in French: Régimes fiscaux des industries extractives: conception et application Also available in Spanish: Regímenes fiscales de las industrias extractivas: Diseño y aplicación

Recent Experiences in Managing Capital Inflows—Cross-Cutting Themes and Possible Policy Framework

Emerging markets (EMs) are experiencing a surge in capital inflows, lifting asset prices and growth prospects. While inflows are typically beneficial for receiving countries, inflow surges can carry macroeconomic and financial stability risks. This paper reviews the recent experience of EMs in dealing with capital inflows and suggests a possible framework for IMF policy advice on the spectrum of measures available to policymakers to manage inflows, including macroeconomic policies, prudential measures and capital controls. Illustrative applications of this framework suggest that it may be appropriate for several countries, based on their current circumstances, to consider prudential measures or capital controls in response to capital inflows. The suggested framework is intended to inform staff policy advice to all Fund members with open capital accounts. It forms part of a broader effort to sharpen Fund surveillance, preserve evenhandedness, and foster greater global policy coordination. As indicated in the Supplement to this paper, this broader effort includes the development of “global rules of the game” on macroprudential policies, capital account liberalization, and reserve adequacy, and the preparation of spillover reports assessing spillovers from the five systemic economies—all of which will inform the current and broader framework being developed.

The International Monetary Fund and its New Economics

ABSTRACTThis article focuses on a key element of the IMF's agenda for change: the repackaging of its economics of crisis around inflation targeting. It examines how this new policy regime redefines the political economy of the IMF's policy advice, and contextualizes it by focusing on Eastern Europe, the region worst affected by the global financial crisis which began in 2007. The article compares the conditionalities designed under the new and old policy regimes and argues that the mainstreaming of inflation targeting reproduces the IMF's function within a neoliberal political economy. It shows how, depending on the role of the IMF in the policy process, the models that inform policy are employed differently. During ‘normal’ times, models engender a contractionary bias that favours speculative capital. When acting as ‘lender of last resort’, the IMF retains the traditional emphasis on fiscal contractions, paying only lip service to its new economics of crisis while further ignoring crucial questions of macroeconomic policy coordination or the destabilizing potential of short‐term capital inflows.

Islamic Republic of Iran: 2008 Article IV Consultation: Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Islamic Republic of Iran

The Islamic Republic of Iran’s 2008 Article IV Consultation underlies that the economy is showing signs of overheating owing to high oil prices and a significant policy stimulus. IMF policy advice has focused on measures to reduce inflation and structural reforms aimed at stimulating growth and employment creation. Consistent with IMF recommendations, in 2007/08, the authorities reduced the non-oil fiscal deficit, contained energy subsidies, improved revenue administration, and intensified their efforts to bring banking supervision closer to international standards.

IMF policy advice, market volatility, commodity price rules, and other essays

The November 1988 conference, held in Pittsburgh, covered an unusually wide range of topics, as the title of the volume suggests. The conference has had long-standing interest in political-economic interaction, the role of institutions, and economic theory and policy. Most of those interests are reflected in this volume.