## Assessing IMF Lending: a Model of Sample Selection

_IMF Working Papers, July 19, 2019_

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**Canonical URL:** [Assessing IMF Lending: a Model of Sample Selection](https://www.imf.org/en/publications/wp/issues/2019/07/19/assessing-imf-lending-a-model-of-sample-selection-47076)

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## Bibliographic details
- Authors: Nicolas Mäder, Jean-Guillaume Poulain, Julien Reynaud
- Published: July 19, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498324618.001

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### Overview
- Extends previous work on the determinants of IMF lending in an interconnected world.
- Introduces a model of sample selection that unifies selection and size dimensions of individual IMF arrangements within a single econometric framework.
- Allows for unobserved heterogeneity to create an additional channel for sample selection at the country level.
- Uses estimated parameters in Monte Carlo simulation of a wide spectrum of global shock scenarios to assess the distribution of potential aggregate IMF lending.

### Methodology
- Unified econometric framework combining:
  - Selection dimension (which countries receive IMF arrangements).
  - Size dimension (how large individual IMF arrangements are).
- Incorporates unobserved heterogeneity at the country level as an additional channel for sample selection.
- Employs Monte Carlo simulation using estimated parameters to generate scenario-based distributions of aggregate lending.

### Key Findings
- Factors associated with larger individual IMF arrangement sizes:
  - Higher external financing needs.
  - Larger exchange rate depreciation.
  - Lower GDP growth.
  - Deteriorated global financial conditions.
- Monte Carlo simulation results:
  - The distribution of potential aggregate IMF lending exhibits a substantial right tail under a wide spectrum of global shock scenarios.

### Policy Implications and Relevance
- The approach provides an insightful input to broader policy discussions on the adequacy of the IMF resources.
- By capturing both selection and size together and allowing for unobserved country-level heterogeneity, the model informs stress-testing and resource adequacy assessments under systemic shock scenarios.

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_Source: https://www.imf.org/en/publications/wp/issues/2019/07/19/assessing-imf-lending-a-model-of-sample-selection-47076_