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Assessing IMF Lending: a Model of Sample Selection

Author

Listed:
  • Nicolas Mäder
  • Jean-Guillaume Poulain
  • Julien Reynaud

Abstract

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.

Suggested Citation

  • Nicolas Mäder & Jean-Guillaume Poulain & Julien Reynaud, 2019. "Assessing IMF Lending: a Model of Sample Selection," IMF Working Papers 2019/157, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/157
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    2. Lang, Valentin, 2016. "The Economics of the Democratic Deficit: The Effect of IMF Programs on Inequality," Working Papers 0617, University of Heidelberg, Department of Economics.
    3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
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    Keywords

    WP; IMF lending;

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