The effects of IMF conditional programs on the unemployment rate

The fundamental mission of the International Monetary Fund (IMF) is to ensure global financial stability and to assist countries in economic turmoil. Although there is a consensus that IMF-supported programs can have a direct effect on the labor market of recipient countries, it remains unclear how IMF participation decision and conditionalities attached to IMF loans can affect the unemployment rate of borrowing countries. Using a world sample of countries from 1980 to 2014, we investigate how lending conditional programs of the IMF affect the unemployment rate. Our analyses account for the selection bias related to, first, the IMF participation decision and, second, the conditions included within the program. We show that IMF program participation significantly increases the unemployment rate of recipient countries. Once we control for the number of conditions, however, we find that only IMF conditions have a detrimental and highly significant effect on the unemployment rate. There is evidence that the adverse short-run effect of IMF conditions holds robust in the long-run. Disaggregating IMF conditionality by issue area, we find adverse effects on the unemployment rate for four policy areas: labor market deregulation, reforms requiring privatization of state-owned enterprises, external sector reforms stipulating trade and capital account liberalization, and fiscal policy reforms that restrain government expenditure. Our initial results are found to be robust across alternative empirical specifications.     

IMF conditionality and central bank independence

This paper studies the role of the International Monetary Fund (IMF) in promoting central bank independence (CBI). While anecdotal evidence suggests that the IMF has been playing a vital role for CBI, the underlying mechanisms of this influence are not well understood. We argue that the IMF has ulterior motives when pressing countries for increased CBI. First, IMF loans are primarily transferred to local monetary authorities. Thus, enhancing CBI aims to insulate central banks from political interference to shield loan disbursements from government abuse. Second, several loan conditionality clauses imply a substantial transfer of political leverage over economic policy making to monetary authorities. As a result, the IMF through pushing for CBI seeks to establish a politically insulated veto player to promote its economic policy reform agenda. We argue that the IMF achieves these aims through targeted lending conditions. We hypothesize that the inclusion of these loan conditions leads to greater CBI. To test our hypothesis, we use a recently available dataset on IMF programs that includes detailed information on CBI reforms and IMF conditionality for up to 124 countries between 1980 and 2012. Our findings indicate that targeted loan conditionality plays a critical role in promoting CBI. These results are robust towards varying modeling assumptions and withstand a battery of robustness checks.     

Once Bitten: The Effect of IMF Programs on Subsequent Reserve Behavior

Traditional models have encountered problems in explaining the accumulation of international reserves, particularly in Asia, in the period since the late 1990s. One suggestion has been that countries have sought to self‐insure against future crises, either because of a perceived increase in the cost of crises or because of the perceived conditionality costs of using IMF credits. This paper offers an empirical investigation of these ideas, disaggregating across regions and across IMF facilities. We find that IMF programs have had a significant positive effect on subsequent reserve accumulation, allowing for other determinants, and that this effect endures over time. We also find that the effect differs between Latin America and Asia, and that it is not simply a phenomenon that is associated with the Asian crisis of 1997/98. The paper goes on to discuss the implications for the design of policy and for the reform of the IMF.     

The political economy of IMF conditionality and central bank independence

International organizations (IOs) often drive policy change in member countries. Given IOs' limited political leverage over a member country, previous research argues that IOs rely on a combination of hard pressures (i.e., conditionality) and soft pressures (i.e., socialization) to attain their political goals. Expanding this literature, we hypothesize that IOs can enhance their political leverage through loan conditions aimed at enhancing the political independence of key administrative units. Studying this mechanism in the context of the International Monetary Fund (IMF), we argue that through prescribing structural loan conditions on central banks (CBI conditionality), the IMF empowers central banks to gain more political leverage with the aim to limit a government's ability to (ab)use monetary policy for political gain. Divorcing monetary authorities from their respective government, the IMF intends to alter political dynamics towards achieving greater program compliance and enhance long-term macro-financial stability. Relying on a dataset including up to 124 countries between 1980 and 2012, we find that the IMF deploys CBI conditionality to countries with fewer checks and balances, a less independent central bank, and where the government relies more heavily on the monetization of public debt.     

The liberalization of trade and foreign direct investment: a political economy analysis

Abstract

In theory, the IMF could influence fiscal and monetary policy via several channels, among them advice to policy makers, conditionality, and the moral hazard it induces with the borrowers. This article tries to disentangle those effects empirically. Using panel data for 98 countries over the period 1975–2000 it analyzes whether IMF involvement indeed influences fiscal and monetary policy in program countries. There is evidence that participation in IMF Standby and Extended Fund Facility arrangements improves economic policy. Money disbursed and the degree to which a program is implemented does not have any systematic influence. The same is true for future availability of resources as measured by exhaustion of a country’s quota with the Fund. The final section discusses policy implications.     

Examining the effect of IMF conditionality on natural resource policy

Can International Monetary Fund (IMF) lending improve natural resource governance in borrowing countries? While most IMF agreements mandate policy reforms in exchange for financial support, compliance with these reforms is mixed at best. The natural resource sector should be no exception. After all, resource windfalls enable short-term increases in discretionary spending, and office-seeking politicians are often unwilling to forgo this discretion by reforming the oil, gas, or mining sector. I investigate how and when borrowers go against their political interests and establish natural resource funds—a tool often promoted by the IMF—in the wake of a loan agreement. Using text analysis, statistical models, and qualitative evidence from natural resource policy and IMF conditionality for 74 countries between 1980 and 2019, I show that borrowers under an IMF agreement are more likely to create or regulate a resource fund, particularly if the agreement includes binding conditions that highlight the salience of natural resource reforms. This study contributes to extant research by proposing a new method to extract information from IMF conditions, by introducing a novel dataset on country-level natural resource policy, and by identifying under what circumstances international reform efforts can help combat the resource curse.     

出口退税政策调整对中国出口影响的实证分析

2007年7月1日,中国大规模下调了出口退税率。本文运用倍差法(difference in difference),对出口退税率降低引起的出口变动进行了实证分析。结果表明:出口退税率下调对易引起贸易摩擦的商品出口增长率负影响显著,对高耗能、高污染、资源型产品的出口增长率负影响不显著。对政策动态影响和对多次政策调整的分析进一步验证了这一结果。本文据此认为该项政策部分而非全部达到了预想的效果。     

Foreign Capital,Spillovers and Export Performance in Emerging Economies: Evidence from Indian IT Firms

The role of foreign capital inflow, foreign direct investment (FDI) and foreign portfolio investment (FPI), on export behavior of both recipients and non‐recipient competing firms in the same sector often guides economic development policy. By using panel data of Indian IT firms over 2000–2006, we show that FDI reduces the sunk costs of entering foreign markets and therefore positively effects both the decision to export and the export propensity of recipient firms. Foreign portfolio investment has no effect on the decision to export, but it does marginally increase the volume of exports. Further, these positive FDI and FPI recipient effects do not spill‐over to non‐recipients.     

Beyond the average effects: The distributional impacts of export promotion programs in developing countries

Do all exporters benefit the same from export promotion programs? Surprisingly, no matter how obvious this question may a priori be when thinking of the effectiveness of these programs, there is virtually no empirical evidence on how they affect export performance in different parts of the distribution of export outcomes. This paper aims at filling this gap in the literature. We assess the distributional impacts of trade promotion activities performing efficient semiparametric quantile treatment effect estimation on assistance, total sales, and highly disaggregated export data for the whole population of Chilean exporters over the 2002-2006 period. We find that these activities have indeed heterogeneous effects over the distribution of export performance, along both the extensive and intensive margins. In particular, smaller firms as measured by their total exports seem to benefit more from export promotion actions.     

EXTERNAL MACROECONOMIC IMBALANCES AND FOREIGN DIRECT INVESTMENT INFLOWS TO DEVELOPING COUNTRIES

We employ relative size of International Monetary Fund (IMF) credit as a proxy for interdependent macro variables that are associated with external macroeconomic imbalances or balance of payment (BOP) crisis to investigate how they impact foreign direct investment (FDI) inflows. Relative size of IMF credit as a share of gross domestic product sends two mixed signals to multinational enterprises (MNEs). First, it is a signal that a country is facing an actual or potential BOP crisis. Second, countries that seek IMF credit typically agree to implement a set of “IMF conditionality” before financial credit is disbursed. This may signal to MNEs that policy reforms that must accompany IMF financial credit may result in ex ante positive economic outlook and stability. We find that relative size of IMF credit is negatively (positively) correlated with FDI inflows to developing countries below (above) a threshold value of economic freedom. The main implication of these findings is that MNEs may view developing countries with below average index of economic freedom as lacking institutional capabilities to implement recommended IMF policy reforms when faced with an actual or potential BOP crisis. Our results are robust across alternative model specifications and consistent with the theory of catalytic finance. (JEL F21, F23, F33)     

Learning‐by‐Exporting Revisited: The Role of Intensity and Persistence*

Two non‐mutually exclusive hypotheses can explain the empirically established export premium: self‐selection of more productive firms into export markets and learning‐by‐exporting. This paper focuses on how the temporal dimension of firms' exporting activities and the intensity of exports influence the scope of learning effects. Using a panel of Swedish firms and dynamic generalized method of moments estimation, we find a learning effect among persistent exporters with high export intensity, but not among temporary exporters or persistent exporters with low export intensity. For small firms, exports boost productivity among persistent exporters with both high and low export intensity, but the effect is stronger for persistent export‐intensive small firms.     

Insulating countries against fluctuations in domestic production and exports: An analysis of Compensatory Financing schemes

For several years the IMF has operated a Compensatory Financing Facility (CFF) whose aim is to smooth out the effects of a shortfall in export receipts in a particular country. In 1981, the Facility was extended to cover imports of foodstuffs, with the objective of reducing food insecurity. The purpose of this paper is to provide a theoretical analysis of the CFF, interpreted as an international scheme whose object is to stabilise some domestic policy target, such as consumption, by providing loans based on the value or volume of a country's exports or imports. The paper shows that, under certain assumptions, the IMF's CFF for exports provides net gains to individual countries. The extension of the scheme to include food imports could provide further gains, but only if it is appropriately redesigned.     

FDI, services trade and economic growth in India: empirical evidence on causal links

This article examines the linkages between inward FDI, services trade (export and import) and economic output using co-integration and VECM causality test. These linkages have been explored both at the aggregate and at the sectoral levels (manufacturing and services). The empirical findings confirm the long-run relationship among these variables. Causality results indicate the presence of bi-directional causal relationship between FDI and economic output as well as between services exports and economic output. The results also bring out feedback relationship between services export and FDI, reconfirming the presence of complementary relationship between the two. At the sectoral level, we find at least a unidirectional causality from FDI and services exports to both manufacturing and services output and also cross-sectoral spillover effects from manufacturing output to services output and vice versa.     

Does Investing in Technology Affect Exports? Evidence from Indian Firms

The authors use firm-level data from Indian manufacturing industries to explore the determinants of exports, focusing on the role played by technology. The empirical analysis, which distinguishes between a firm's decision to export and the volume of its exports conditional on its having decided to export, reveals that investments in technology via R&D and technology transfer agreements can facilitate the entry of Indian firms into export markets. However, their influence on the volume of exports is fairly limited. Factors with a more broad-based influence on both export participation and volumes include labor intensity and, especially, firm size.     

湖南制造业出口竞争力提升及其对策——基于行业面板数据的实证

基于生产函数理论模型,理论构建了含出口变量及其滞后项的随机效应面板分布滞后模型,以探讨湖南制造业出口竞争力问题。实证结果表明,湖南制造业存在规模经济效应,出口的贡献率仅约为10.59%。出口及其滞后项变量、总资产、劳动力增加将推动制造业总产出水平扩张,出口变量的边际影响值之和为0.13;出口变动对制造业总产出水平波动的长期乘数效应值为1.15。出口对制造业产出水平的影响存在时滞效应,滞后阶数为2。为此,提出的对策:改变劳动密集型产业结构为资本密集型产业结构,增加资本、出口份额对湖南制造业经济效应影响。     

Product innovation,process innovation and export propensity: persistence,complementarities and feedback effects in Spanish firms

Drawing on a longitudinal data of Spanish manufacturing firms, this study explores the persistence of technological innovation and exports, their potential complementary relations and feedback effects. Empirical results suggest the presence of both true and spurious state dependence in all three activities. True state dependence in technical innovation and exports implies intertemporal spillovers relevant to the evaluation of innovation and export policy measures. However, given that results also suggest spurious state dependence, firm-specific characteristics should be taken into account in promoting technological innovations and exports. In addition, we find a strong complementarity between product and process innovation both through a contemporaneous effect and via unobserved firm characteristics. However, concerning complementarity between innovation and exports, results suggests complementarity only through contemporaneous effects. Finally, we find no support for the causal link from past product and process innovations to current export activities.     

An Analysis of Exports and Growth in India: Cointegration and Causality Evidence (1971–2001)

The relationship between exports and economic growth has been analysed by a number of recent empirical studies. This paper re‐examines the sources of growth for the period 1971–2001 for India. It builds upon Feder's (1983 ) model to investigate empirically the relationship between export growth and GDP growth (the export led growth hypothesis), using recent data from the Reserve Bank of India, and by focusing on GDP growth and GDP growth net of exports. We investigate the following hypotheses: (i) whether exports, imports and GDP are cointegrated using the Johansen approach and Breitung's nonparametric cointegration test; (ii) whether export growth Granger causes GDP growth; (iii) and whether export growth Granger causes investment. Finally, a VAR is constructed and impulse response functions (IRFs) are employed to investigate the effects of macroeconomic shocks.     

Export sophistication and the terms of trade of the developing and emerging countries

The question of the terms of trade has not yet been studied by the new empirical literature on the export sophistication, which focuses only on its effect on economic growth. The contribution of this paper is to investigate whether the increase in the export sophistication is terms of trade worsening or improving for the developing and emerging economies. Importantly, we find that the increase in the sophistication of the developing countries’ exports is accompanied by a deterioration of their terms of trade.     

Credit constraints and exports: evidence for German manufacturing enterprises

This study uses newly available enterprise-level data for firms from manufacturing industries in Germany to test for the link between credit constraints, measured by a credit-rating score from the leading credit-rating agency Creditreform, and exports. In line with hypotheses from a theoretical model, we find a positive link between a better credit-rating score of a firm and both the probability that the firm is an exporter and a higher share of exports in total sales. This link, though statistically highly significant, is not very strong from an economic point of view. While empirical evidence for the hypothesis that credit-constrained firms are less likely to start to export is, at best, weak, we find no evidence for a statistically significant difference in credit-rating scores between firms that stopped to export and firms that continued to export.     

EXPORTS,EXPORT COMPOSITION AND GROWTH: A SIMULTANEOUS ERROR-CORRECTION MODEL FOR TUNISIA

The export-economic growth relationship has been dealt with in several empirical studies concerning cross-section and time series data. Although this research has contributed to measure the impact of exports on economic growth, it still has three main drawbacks. First, the studies on cross-section data suppose homogeneous production techniques for the countries involved. Second, most of the research introduces a bias in the estimation of the export impact on economic growth since it neglects all effects of simultaneity between these two variables. Finally, most of the estimated regressions in these studies may constitute ‘spurious‘ regressions since the analysis of the stationarity of the variables is missing. This paper considers the Tunisian case and tries to study the dynamics between growth and exports through a simultaneous error correction model. The study shows the presence of a positive and significant relationship between exports and economic growth driven by manufactured exports rather than food-processing exports and international tourism. The measurement of such a relationship is understated if the simultaneity between export expansion and G.D.P growth is ignored. [C 32, C 51, C 52, F 43]