The IMF and economic growth: An analysis of lending to developing countries during 1983-2010

Abstract: The International Monetary Fund (IMF) is an international organization working for economic cooperation and stability. The IMF’s work is aimed at both temporary credit access and structural reforms to increase economic growth. In theory, the IMF can influence economic growth via several channels. This paper identifies four; provide money through loan disbursements, work as an insurance for investors, attach policy conditions to programs and monitor the world economy. The analysis consists of a panel of 86 developing countries during the period of 1983-2010, employing both OLS and 2SLS to control for possible endogeneity in the estimations. Performing a regression analysis on the overall effect of IMF programs on economic growth, a significantly positive result is confirmed. This thesis then opens up to a new input by controlling for the effect on growth during the 1980s, 1990s and 2000s, for six different loan types and three large regions in the world. The results show a significantly positive effect on economic growth during the 1980s and 2000s. Two lending arrangements have confirmed positive effects, the Stand-by arrangements (SBA) and Extended credit facility (ECF). Finally the IMF is successful in raising economic growth in Asia and South America. In summary, this thesis concludes that the IMF is successful in promoting growth.