IMF programs: Who is chosen and what are the effects?

Robert J. Barro, Jong Wha Lee

Research output: Contribution to journalArticlepeer-review

305 Citations (Scopus)


IMF loans react to economic conditions but are also sensitive to political-economy variables. Loans tend to be larger and more frequent when a country has a bigger quota and more professional staff at the IMF and when a country is more connected politically and economically to the United States and major European countries. These results are of considerable interest for their own sake. More importantly for present purposes, the results provide instrumental variables for estimating the effects of IMF loan programs on economic growth and other variables. This instrumental estimation allows us to sort out the economic effects of the loan programs from the responses of IMF lending to economic conditions. The estimates show that a higher IMF loan-participation rate reduces economic growth. IMF lending does not have significant effects on investment, inflation, government consumption, and international openness. However, IMF loan participation has small negative effects on democracy and the rule of law. The reduction in the rule of law implies an additional, indirect channel whereby IMF lending reduces economic growth.

Original languageEnglish
Pages (from-to)1245-1269
Number of pages25
JournalJournal of Monetary Economics
Issue number7
Publication statusPublished - 2005 Oct

Bibliographical note

Funding Information:
This research has been supported in part by a grant from the National Science Foundation. We appreciate comments from Alberto Alesina, Eduardo Borensztein, Jeffrey Frankel, Jeffrey Frieden, Jinyong Hahn, Simon Johnson, Mohsin Kahn, Robert King, Myoung-jae Lee, Greg Mankiw, Roberto Perrotti, and seminar participants at the Australian National University, Harvard University, the International Monetary Fund, the Korean Econometric Society Workshop, the State University of New York at Buffalo, the Study Center Gerzensee, and Tokyo University. Yunjong Eo provided valuable research assistance.


  • Economic growth
  • IMF lending
  • Instruments
  • Political economy

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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