The Incidence and Effectiveness of Prior Actions in IMF-supported Programs

September 1, 2006

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Uma Ramakrishnan, and Alun H. Thomas The Incidence and Effectiveness of Prior Actions in IMF-supported Programs, (USA: International Monetary Fund, 2006) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Prior actions are measures that need to be implemented prior to Board approval of an IMFsupported program. This paper examines whether such prior actions can signal a willingness to implement reforms, especially when the member's track record is weak. We find some support for this signaling role, particularly for programs supported by the General Resources Account (GRA). Controlling for the member's previous track record, prior actions are associated with greater compliance with other structural conditions, suggesting their possible use as a screening device. Moreover, prior actions set at program approval serve as a useful screening device and strengthen the macroeconomic targets set out in the IMF-supported program. The results also reveal a demonstrable screening effect on growth over the medium term, since the growth impact of the ratio of prior actions at the outset versus the rest of the program is significantly positive while the total number of prior actions is not statistically significant.

Subject: Budget planning and preparation, Fiscal stance, Inflation, Public expenditure review, Real exchange rates

Keywords: Government, IMF effort, IMF's program conditionality, Program, Program implementation, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/213
Stock No:

WPIEA2006213
ISBN:

9781451864731
ISSN:

1018-5941

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