Compliance with IMF conditions and economic growth

Abstract

Using data for 110 countries and GMM estimations, we examine the effects of IMF programs on economic growth. In addition to the traditional focus on the effects of program participation, program type, and the size of IMF loans on growth, using the unique dataset MONA (Monitoring of Fund Arrangements), we add the novel angle of program compliance to the analysis by constructing compliance and non-compliance performance measures. Our empirical results indicate that IMF program participation, general conditionality, and having concessional programs do not have any significant growth effect. With respect to program compliance, compliance with fiscal balance and BOP/reserve conditions does not affect growth rates, whereas compliance with external debt, short-term debt, total domestic credit, and credit to government/public sector conditions contribute to growth. Therefore, our empirical results strongly indicate that compliance matters.