| |
Working
Papers
The gap between the average income per capita levels of the poorest and the richest nations has increased during the recent eras of globalization. This paper reviews the evidence on the determinants of the disparities in per capita incomes, which has focused on the role of institutions in fostering development. Institutions primarily reflect domestic conditions, but globalization may have an impact on their development. Globalization also has direct effects on economic activity which affects the incidence of poverty, although all the channels of transmission are not fully understood. Globalization can, however, be better managed to benefit the poor.
This paper
investigates changes in IMF activities using the analytical
framework of international public goods. Since its founding,
the mix of IMF activities has changed greatly. IMF now promotes
international financial stability, whose outputs are joint
products with varying degrees of publicness. In recent years,
IMF loans (recipient-specific benefits) have assumed decreased
importance, while the Fund's technical assisatnace and monitoring
activities have taken on greater importance. As a consequence,
the club and purely public outputs (e.g., disseminating
best
practices)
have grown
as
a share
of IMF activities. The future of IMF is also addressed, especially
in light of increased private capital flows.
This paper
examines the effects of external and domestic financial crises
on investment in a sample of emerging markets
during the period 1976-2002. Our objective is to distinguish
between the impact of capital reversals ("sudden stops")
and domestic banking crises on investment. We find that in the
absence
of bank crises sudden stops do not have a significant effect
on investment. Bank crises, on the other hand, have a
significant negative effect on investment
even in the absence of a contemporaneous sudden stop crisis.
We also confirm that openness to capital flows exacerbates the
severity
of the adverse impact of banking crises on investment. The critical
component of capital flight appears to be the reversal of short
duration flows, intermediated through the banking sector. Our
results provide statistical support for the policy view that
a strong banking sector which can withstand the negative fallout
of capital flight is essential for countries that open their
economies to international financial flows.
The International Monetary Fund has been blamed for precipitating
financial crises during the 1990s by pressuring countries to
liberalize their capital accounts prematurely. In this paper,
we empirically evaluate this claim. Using data from a panel
of developing economies from the 1982-98 period, we examine
whether
the changes in the regime governing capital flows took place
during participation in IMF programs. We find evidence that
IMF program participation is correlated with capital
account liberalization
episodes during the 1990s. We use the Miniane (2004) and Chinn-Ito
(2005) indicators of capital account openness to test the robustness
of our results. To determine whether decontrol was premature
we compare the economic characteristics of countries that decontrolled
during IMF programs with those of countries who did so independently.
The former group of countries had larger current account and
budget deficits, higher rates of inflation and lower reserve
holdings before they liberalized than did the independent group.
However, the group that deregulated capital flows while part
of IMF programs recorded improvements in all these areas once
liberalization was underway, whereas the second group only
showed a fall in inflation.
The IMF
renamed its concessionary lending facility for low-income countries
the Poverty Reduction and Growth Facility in 1999 to reflect
an emphasis on poverty reduction as well as growth as objectives
for this special facility. This paper uses a fixed-effects
model to analyze the effect of IMF programs on poverty with
data from 82 countries during 1985 to 2000. Two indicators
of poverty, infant mortality rates and the Human Development
Index (HDI), are utilized, and the effects of economic and
governance factors as well as the IMF’s concessionary
and nonconcessionary programs are investigated. The results
show that the IMF’s programs have no significant direct
impact on either indicator of poverty. Growth and good governance,
however, both have significant impacts, lowering infant mortality
and increasing the HDI. The Fund’s concessionary programs
increase the impact of growth on lowering infant mortality,
while the nonconcessionary programs lower the impact of growth
on the HDI. We also test for the impact of IMF programs on
growth. Concessionary programs have a significant contemporaneous
positive effect, while nonconcessionary programs have a significant
lagged positive effect. Trade openness also has a positive
impact on growth, while inflation has a negative effect.
Recent Publications
A
country that enters an IMF sponsored lending
program agrees to enact
stabilization and reform measures. The actual disbursal
of funds by the Fund is tied through a process known
as conditionality to the implementation of these policies.
Many
programs
are
not fully completed because the borrowing government
fails to comply with the original agreement. This paper
presents a model of program implementation, which is then
empirically tested with data from the period 1975-99. The
IMF and
the
borrowing country are shown to have asymmetric
evaluations of a program’s
discounted benefits, due to differences in their measurements
of the benefits, the relevant time frame and appropriate discount
rate. The model also distinguishes between a government that
seeks to maximize national welfare and an autocracy that acts
only to benefit the ruling group. It can also be shown that
the existence of threshold effects in the benefits may result
in dual optimal implementation rates. The results of the empirical
analysis demonstrate that successful program implementation
is affected by a country’s trade openness,
the duration of the political regime, the ideological
cohesion
of the
government, and the degree of political openness.
The
programs of the International Monetary Fund were originally
designed to
provide short-term
assistance to countries implementing
policies to address balance of payments disequilibria.
In recent decades, however, the Fund has instituted
new facilities with
longer time horizons, while many developing countries
have adopted consecutive programs. As a result,
the length of time spent by
countries in IMF programs has grown. This paper
analyzes the IMF program spells for a group of emerging
economies over the
period of 1982 to 2000. Duration models are used
to investigate
the time dependence of the failure rate of the
spells and the factors that affect the duration of program
spells. The hazard
ratio of program spells has a non-monotonic shape,
first
rising and then falling over time.
A spell’s
duration is independent of a previous
spell length or the number of previous spells.
Program duration is extended for those countries
with lower per-capita income, exports concentrated in
primary goods, landlocked geographic
status and autocratic regimes. Governments that
are ideologically divided have shorter spells, which may
reflect a breakdown
in governance.
This paper evaluates the literature on the lending programs of
the IMF. The first section deals with the initiation of a Fund
program, which has been shown to be influenced by political and
institutional variables. A second focus of research analyzes
the design and implementation of Fund supported polices, since
many programs are often not successfully completed. The third
issue surveyed is the impact of IMF policies on the economy of
the borrowing government. The effect of Fund programs on private
capital flows is also examined. The last section presents issues
that merit further research.
IMF programs are designed to provide a temporary source of finance
for countries with balance of payments disequilibria. Consequently,
borrowing from the IMF should occur infrequently and be widely
distributed among member countries. However, some countries are
recurrent users of Fund resources. This paper investigates which
variables account for multiple borrowings from the IMF. We use
models of count data to examine the impact of the need for financing,
domestic policies, external shocks, and structural and institutional
factors on borrowings between 1980 and 1996. We find that recidivist
borrowers have lower reserve holdings, larger current account
deficits and capital outflows, lower but less volatile terms
of trade, larger debt service and external debt ratios, lower
investment rates and per-capita income, and weak governance.
|
|
