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IMF Programs and Growth: Is Optimism Defensible?

Author

Listed:
  • Reza Baqir

    (International Monetary Fund)

  • Rodney Ramcharan

    (International Monetary Fund)

  • Ratna Sahay

    (International Monetary Fund)

Abstract

IMF-supported programs focus on key objectives (such as growth, inflation, and the external current account) and on intermediate policy targets (such as monetary and fiscal policies) needed to achieve these objectives. In this paper we use a new, large data set, with information on 94 programs between 1989 and 2002, to compare programmed objectives and policy targets to actual outcomes. We report two broad sets of results. First, we find that outcomes typically fell short of expectations in growth and inflation but were broadly in line with the programmed external current account objectives. Similarly, programmed intermediate policy targets were generally more ambitious than the intermediate policy outcomes. Second, focusing on growth, we examine the relationship between objectives and policy targets, and find differences in the way ambitious monetary and fiscal targets affected the achievement of the growth objective. On the one hand, more ambitious fiscal targets, even when they were missed, led to better growth performance. On the other hand, more ambitious monetary targets tended to be associated with lower growth performance.

Suggested Citation

  • Reza Baqir & Rodney Ramcharan & Ratna Sahay, 2005. "IMF Programs and Growth: Is Optimism Defensible?," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 260-286, September.
    • Handle: RePEc:pal:imfstp:v:52:y:2005:i:2:p:260-286
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    Citations

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    Cited by:

    1. Eicher, Theo S. & Kuenzel, David J. & Papageorgiou, Chris & Christofides, Charis, 2019. "Forecasts in times of crises," International Journal of Forecasting, Elsevier, vol. 35(3), pages 1143-1159.
    2. Graham Bird, 2005. "Over‐optimism and the IMF," The World Economy, Wiley Blackwell, vol. 28(9), pages 1355-1373, September.
    3. Bernhard Reinsberg & Thomas Stubbs & Alexander Kentikelenis, 2022. "Compliance, defiance, and the dependency trap: International Monetary Fund program interruptions and their impact on capital markets," Regulation & Governance, John Wiley & Sons, vol. 16(4), pages 1022-1041, October.
    4. Ruben Atoyan & Patrick Conway, 2011. "Projecting macroeconomic outcomes: Evidence from the IMF," The Review of International Organizations, Springer, vol. 6(3), pages 415-441, September.
    5. Paul Beaudry & Tim Willems, 2022. "On the Macroeconomic Consequences of Over-Optimism," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 38-59, January.
    6. Eicher, Theo S. & Rollinson, Yuan Gao, 2023. "The accuracy of IMF crises nowcasts," International Journal of Forecasting, Elsevier, vol. 39(1), pages 431-449.
    7. Balima, Hippolyte W. & Sokolova, Anna, 2021. "IMF programs and economic growth: A meta-analysis," Journal of Development Economics, Elsevier, vol. 153(C).
    8. Martin Iseringhausen & Ms. Mwanza Nkusu & Wellian Wiranto, 2019. "Repeated Use of IMF-Supported Programs: Determinants and Forecasting," IMF Working Papers 2019/245, International Monetary Fund.
    9. Committeri, Marco & L´Hotellerie-Fallois, Pilar & Algarra, Monica & Balteanu, Irina & Eijking, Carlijn & Estefanía, Julia & Gallego, Sonsoles & Garelli, Serena & Gibson, Heather & Heinbuecher, Robert , 2019. "Conditionality and design of IMF-supported programmes," Occasional Paper Series 235, European Central Bank.

    More about this item

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F35 - International Economics - - International Finance - - - Foreign Aid

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