Assessing IMF Lending: a Model of Sample Selection
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Summary:
Extending previous work on the determinants of IMF lending in an interconnected world, we introduce a model of sample selection in which both selection and size dimensions of individual IMF arrangements are presented within a unified econometric framework. We allow for unobserved heterogeneity to create an additional channel for sample selection at the country level. The results suggest that higher external financing needs, larger exchange rate depreciation, lower GDP growth, as well as deteriorated global financial conditions, are associated with larger individual IMF arrangement sizes. Using the estimated parameters, Monte Carlo simulation of a wide spectrum of global shock scenarios suggest that the distribution of potential aggregate IMF lending exhibits a substantial right tail. Our approach may provide an insightful input to broader policy discussions on the adequacy of the IMF resources.
Series:
Working Paper No. 2019/157
Subject:
Capital account crisis Financial contagion Global financial crisis of 2008-2009 Public expenditure review Stress testing
English
Publication Date:
July 19, 2019
ISBN/ISSN:
9781498324618/1018-5941
Stock No:
WPIEA2019157
Pages:
23
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