International Monetary Fund (IMF) programs and their impact on GDP growth: the case of Transition Countries

This thesis contains four independent chapters that are aimed towards contributing to our understanding of three key questions in the literature on International Monetary Fund (IMF) programs and their impacts on economic growth. In the first chapter of the thesis, we give a brief introduction to International Monetary Fund (IMF) and how it works. Then, we continue briefly giving some ideas on key critiques over IMF. Chapter 2 continues the discussion on previous empirical literature on this subject. We start by discussing main methodologies used in this field of study/empirical research. And then we continue by reviewing the empirical literature and the presented results for some of the key macroeconomic variables, which are also key IMF objectives, such as: balance of payments, current account balance, inflation, and economic growth. Chapter 3 focuses on analysing in more details the literature that has estimated the effect of IMF programs on GDP growth, specifically. As we will see in chapter 2, the existing empirical literature appears to be unable to provide conclusive results regarding the effects of IMF programs on GDP growth of countries that participate on such programs. In this regard, in chapter 3 we use Meta-Regression Analysis (MRA), which is a technique that provides an appropriate tool of quantitatively analysing and estimating the influence of alternative model specifications and data characteristics in the empirical literature. The results of our MRA suggest that there is no publication bias in the empirical literature and we also fail to find a ‘genuine effect’ of IMF programs on growth in the literature. Finally, in fourth Chapter, we focus on factors that determine participation in an IMF program, and what are the effects of such programs on GDP growth in Transition Countries. We start our analysis with the premise that IMF is a political institution, and we use a political-economy approach. We use Tobit, Probit, 2SLS and GMM techniques to come to our results. From our results, we conclude that the role of political-economy variables used in our models is robust through all specification, although not statistically significant. We also conclude that, very much in line with recent empirical literature review, participating in IMF programs has a significantly negative impact on per capita GDP growth.