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Are IMF rescue packages effective? A synthetic control analysis of macroeconomic crises

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  • Kuruc, Kevin

Abstract

Whether, and to what degree, IMF lending succeeds in stabilizing economies remains an open question. Here, a synthetic control analysis of macroeconomic crises with IMF intervention is performed—leveraging the existence of similar crises without intervention—that finds positive recovery effects. In the first five years following a crisis, output differences are, on average, nearly two percent of GDP per year. Consistent with a liquidity channel, effects are hump-shaped and fade in the medium run. An analysis of historical IMF forecasts provides evidence against selection as a spurious driver of this result, suggesting that these positive estimates are indeed causal.

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  • Kuruc, Kevin, 2022. "Are IMF rescue packages effective? A synthetic control analysis of macroeconomic crises," Journal of Monetary Economics, Elsevier, vol. 127(C), pages 38-53.
    • Handle: RePEc:eee:moneco:v:127:y:2022:i:c:p:38-53
    DOI: 10.1016/j.jmoneco.2022.02.002
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    More about this item

    Keywords

    IMF; Financial crises; Synthetic controls; Business cycle policy;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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