Evaluating the Impact of Non-Financial IMF Programs Using the Synthetic Control Method

May 5, 2017

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Monique Newiak, and Tim Willems. Evaluating the Impact of Non-Financial IMF Programs Using the Synthetic Control Method, (USA: International Monetary Fund, 2017) accessed September 17, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We use the Synthetic Control Method to study the effect of IMF advice on economic growth, inflation, and investment. The analysis exploits the existence of IMF programs that do not involve any financing (Policy Support Instruments, “PSIs”). This enables us to focus on the effects of IMF monitoring, advice, and approval (as opposed to direct financial assistance). In addition, countries with non-financial programs are typically not crisis-struck – thereby mitigating the reverse causality problem and facilitating the construction of counterfactuals. Results suggest that treated countries add about 1 percentage point in annual real GDP per capita growth, with inflation being lower by some 3 percentage points per year. While we do not find evidence for an impact on total investment and the resulting capital stock, PSI-treatment does seem to stimulate foreign direct investment.

Subject: Consumer price indexes, Education, Financial crises, Financial institutions, Inflation, Prices, Stocks

Keywords: Absolute value, Adoption of an IMF-program, Adverse selection, Causal effect of IMF-program, Consumer price indexes, Economic growth, Effectiveness of IMF-program, IMF loan-participation rate, IMF operations, IMF's executive board, Inflation, International Monetary Fund, Investment, Program-evaluation, PSI review, Stocks, Structural adjustment, Sub-Saharan Africa, Traditional IMF program, Treatment effect, Types of IMF-engagement, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/109
Stock No:

WPIEA2017109
ISBN:

9781475599039
ISSN:

1018-5941

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