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

IMF Working Papers, January 17, 2020

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Paper develops the first sentiment index measuring member countries’ reception of IMF policy advice at the time of Article IV Consultations using state-of-the-art deep learning techniques.
Authors: Ghada Fayad, Chengyu Huang, Yoko Shibuya, Peng Zhao
Date: January 17, 2020
Core objective: quantify how authorities of member countries receive Fund advice and analyze heterogeneity across country and policy characteristics.

Technique: state-of-the-art deep learning and Natural Language Processing to build a sentiment index from IMF Article IV staff report texts.
Application point: measurement at the time of Article IV Consultations.
Subject areas analyzed include commodity price fluctuations, economic sectors, financial sector, and other policy areas listed under keywords.

Overall reception:
- Authorities of member countries largely agree with Fund advice.
Heterogeneity in sentiment across country and policy characteristics:
- Variation across country size.
- Variation across external openness.
- Variation across policy sectors and their assessed riskiness.
- Variation across political systems.
- Variation across commodity export intensity.
Program and assistance dynamics:
- Sentiment changes during and after a financial arrangement or program with the Fund.
- Sentiment changes when a country receives IMF technical assistance.
Broader implications:
- Results shed light on key aspects of Fund surveillance.
- Redefines how the IMF can view its relevance, value added, and traction with its member countries.

Use sentiment measures to assess Fund traction and perceived relevance of surveillance and advice.
Consider tailoring communication and advice by:
- Country size.
- External openness.
- Political system characteristics.
- Commodity export intensity.
- Policy sector risk assessments.
Monitor sentiment dynamics linked to:
- Financial arrangements or programs.
- Receipt of technical assistance.