Advertisement

The Review of International Organizations

, Volume 13, Issue 3, pp 359–393 | Cite as

Do IMF programs catalyze donor assistance to low-income countries?

  • Yasemin Bal Gündüz
  • Masyita Crystallin
Article
  • 155 Downloads

Abstract

This study explores whether IMF-supported programs in low-income countries (LICs) catalyze Official Development Assistance (ODA). Based on a comprehensive set of ODA measures and using the Propensity Score Matching approach to address selection bias, we show that programs addressing policy or exogenous shocks have a significant catalytic impact on both the size and the modality of ODA. Moreover, for gross disbursements the impact is greatest when LICs are faced with substantial macroeconomic imbalances or large shocks. Results indicate a sharp difference between the responsiveness of multilateral and bilateral donors to programs. While multilateral donors significantly raise their gross and net disbursements to program countries, the aid allocation by bilateral donors, on both a gross and net basis, does not seem to be affected by programs.

Keywords

IMF-supported programs Official development assistance (ODA) Catalytic impact Low-income countries (LICs) Propensity score matching Aid allocation Aid coordination Bilateral aid Multilateral aid 

JEL classification

F33 F35 F53 F63 O19 

Notes

Acknowledgments

The authors would like to thank two anonymous referees, Axel Dreher, Chris Lane, Catherine Pattillo, Olaf Unteroberdoerster, Marco Arena, Wendell Daal, Ermal Hitaj, Mumtaz Hussain, Paulo Lopez, Henry Moone, Nkunde Mwase, Saad Quayyum, Frank Dong Wu, seminar participants at the IMF, and OECD colleagues Brenda Killen, Elena Bernaldo de Quirós, Olivier Bouret, Andrzej Suchodolski for very helpful comments and suggestions. Merceditas San Pedro-Pribram, Liz Baxter, and Kathryn Norris provided excellent editorial assistance. The usual disclaimer applies.

Supplementary material

11558_2017_9280_MOESM1_ESM.do (9 kb)
ESM 1 (DO 9 kb)
11558_2017_9280_MOESM2_ESM.dta (848 kb)
ESM 2 (DTA 847 kb)
11558_2017_9280_MOESM3_ESM.do (18 kb)
ESM 3 (DO 18 kb)
11558_2017_9280_MOESM4_ESM.docx (38 kb)
ESM 4 (DOCX 38.3 kb)

References

  1. Acharya, A., De Lima, A. T. F., & Moore, M. (2006). Proliferation and fragmentation: Transactions costs and the value of aid. The Journal of Development Studies, 42(1), 1–21.CrossRefGoogle Scholar
  2. Aldasoro, I., Nunnenkamp, P., & Thiele, R. (2010). Less aid proliferation and more donor coordination? The wide gap between words and deeds. Journal of International Development, 22(7), 920–940.CrossRefGoogle Scholar
  3. Alesina, A., & Dollar, D. (2000). Who gives foreign aid to whom and why? Journal of Economic Growth, 5(1), 33–63.CrossRefGoogle Scholar
  4. Anderson, E. (2012). Aid fragmentation and donor transaction costs. Economics Letters, 117(3), 799–802.CrossRefGoogle Scholar
  5. Annen, K., & Kosempel, S. (2009). Foreign aid, donor fragmentation, and economic growth. The BE Journal of Macroeconomics, 9(1), 1–30.Google Scholar
  6. Atoyan, R., & Conway, P. (2006). Evaluating the impact of IMF programs: A comparison of matching and instrumental-variable estimators. The Review of International Organizations, 1(2), 99–124.CrossRefGoogle Scholar
  7. Bal Gündüz, Y. (2009). Estimating demand for IMF financing by low-income countries in response to shocks. No. 9-263. Washington, D.C.: International Monetary Fund.Google Scholar
  8. Bal Gündüz, Y. (2016). The economic impact of short-term IMF engagement in low-income countries. World Development, 87, 30–49.CrossRefGoogle Scholar
  9. Bal Gündüz, Y., Ebeke, M. C., Hacibedel, M. B., Kaltani, M. L., Kehayova, M. V. V., Lane, M. C., … & Thornton, M. J. (2013). The Economic Impact of IMF-Supported Programs in Low-Income Countries. IMF occasional paper No. 277. Washington, D.C.: International Monetary Fund.Google Scholar
  10. Becker, T., & Mauro, P. (2007). Output drops and the shocks that matter. In IMF working paper 07/172. Washington, DC: International Monetary Fund.Google Scholar
  11. Berthélemy, J. C. (2006). Bilateral donors’ interest vs. recipients’ development motives in aid allocation: Do all donors behave the same? Review of Development Economics, 10(2), 179–194.CrossRefGoogle Scholar
  12. Bigsten, A. (2006). Donor coordination and the uses of aid. Working papers in economics, 196. Göteborg University, Göteborg.Google Scholar
  13. Bird, G. (2007). The IMF: A bird's eye view of its role and operations. Journal of Economic Surveys, 21(4), 683–745.CrossRefGoogle Scholar
  14. Bird, G., & Rowlands, D. (2002). Do IMF programmes have a catalytic effect on other international capital flows? Oxford Development Studies, 30(3), 229–249.CrossRefGoogle Scholar
  15. Bird, G., & Rowlands, D. (2007). The IMF and the mobilisation of foreign aid. Journal of Development Studies, 43(5), 856–870.CrossRefGoogle Scholar
  16. Bird, G., & Rowlands, D. (2009a). In J. M. Boughton & D. Lombardi (Eds.), Finance, development, and the IMF. Oxford University Press: Oxford.Google Scholar
  17. Bird, G., & Rowlands, D. (2009b). The IMF's role in mobilizing private capital flows: Are there grounds for catalytic conversion? Applied Economics Letters, 16(17), 1705–1708.CrossRefGoogle Scholar
  18. Bird, G., & Rowlands, D. (2009c). A disaggregated empirical analysis of the determinants of IMF arrangements: Does one model fit all? Journal of International Development, 21(7), 915–931.CrossRefGoogle Scholar
  19. Bird, G., & Rowlands, D. (2017). The effect of IMF Programmes on economic growth in low income countries: An empirical analysis. The Journal of Development Studies, 1–18.Google Scholar
  20. Brück, T., & Xu, G. (2012). Who gives aid to whom and when? Aid accelerations, shocks and policies. European Journal of Political Economy, 28(4), 593–606.CrossRefGoogle Scholar
  21. Bruckner, M., & Ciccone, A. (2010). International commodity prices, growth, and the outbreak of civil war in sub-Saharan Africa. The Economic Journal, 120(544), 535–550.CrossRefGoogle Scholar
  22. Chamberlain, G. (1982). Multivariate regression models for panel data. Journal of Econometrics, 18(1), 5–46.CrossRefGoogle Scholar
  23. Claessens, S., Cassimon, D., & Van Campenhout, B. (2009). Evidence on changes in aid allocation criteria. The World Bank Economic Review, 23(2), 185–208.CrossRefGoogle Scholar
  24. Clist, P. (2011). 25 years of aid allocation practice: Whither selectivity? World Development, 39(10), 1724–1734.CrossRefGoogle Scholar
  25. Clist, P., Isopi, A., & Morrissey, O. (2012). Selectivity on aid modality: Determinants of budget support from multilateral donors. The Review of International Organizations, 7(3), 267–284.CrossRefGoogle Scholar
  26. Cottarelli, M. C., & Giannini, C. (2002). Bedfellows, hostages, or perfect strangers? Global capital markets and the catalytic effect of IMF crisis lending. In IMF working paper 02–193. Washington, DC: International Monetary Fund.Google Scholar
  27. Dabla-Norris, E., & Bal Gündüz, Y. (2014). Exogenous shocks and growth crises in low-income countries: A vulnerability index. World Development, 59, 360–378.CrossRefGoogle Scholar
  28. Davies, R. B., & Klasen, S. (2015). Of donor coordination, free-riding, darlings, and orphans: The dependence of bilateral aid on other bilateral giving. Courant Research Centre: Poverty, Equity and Growth - Discussion Papers, No. 168.Google Scholar
  29. Dehejia, R. H., & Wahba, S. (1999). Causal effects in nonexperimental studies: Reevaluating the evaluation of training programs. Journal of the American Statistical Association, 94(448), 1053–1062.CrossRefGoogle Scholar
  30. Djankov, S., Montalvo, J. G., & Reynal-Querol, M. (2009). Aid with multiple personalities. Journal of Comparative Economics, 37(2), 217–229.CrossRefGoogle Scholar
  31. Dollar, D., & Levin, V. (2006). The increasing selectivity of foreign aid, 1984–2003. World Development, 34(12), 2034–2046.CrossRefGoogle Scholar
  32. Dreher, A., Nunnenkamp, P., & Schmaljohann, M. (2015). The allocation of German aid: Self-interest and government ideology. Economics and Politics, 27(1), 160–184.CrossRefGoogle Scholar
  33. Dreher, A., Mölders, F., & Nunnenkamp, P. (2010). Aid delivery through non-governmental Organisations: Does the Aid Channel matter for the targeting of Swedish aid? The World Economy, 33(2), 147–176.CrossRefGoogle Scholar
  34. Easterly, W. (2007). Are aid agencies improving? Economic Policy, 22(52), 634–678.CrossRefGoogle Scholar
  35. Feeny, S., & McGillivray, M. (2008). What determines bilateral aid allocations? Evidence from time series data. Review of Development Economics, 12(3), 515–529.CrossRefGoogle Scholar
  36. Frot, E., & Santiso, J. (2011). Herding in aid allocation. Kyklos, 64(1), 54–74.CrossRefGoogle Scholar
  37. Frölich, M. (2004). Finite-sample properties of propensity-score matching and weighting estimators. Review of Economics and Statistics, 86(1), 77–90.CrossRefGoogle Scholar
  38. Fuchs, A., Nunnenkamp, P., & Öhler, H. (2015). Why donors of foreign aid do not coordinate: The role of competition for export markets and political support. The World Economy, 38(2), 255–285.CrossRefGoogle Scholar
  39. Gangl, M. (2004). RBOUNDS: Stata module to perform Rosenbaum sensitivity analysis for average treatment effects on the treated. Statistical Software Components.Google Scholar
  40. Gehring, K., Michaelowa, K., Dreher, A., & Spörri, F. (2015). Do we know what we think we know? Aid fragmentation and effectiveness revisited. Courant Research Centre: Poverty, Equity and Growth - Discussion Papers, No. 185.Google Scholar
  41. Guillaumont, P., Jeanneney, S. G., & Wagner, L. (2017). How to take into account vulnerability in aid allocation criteria and lack of human capital as well: Improving the performance based allocation. World Development, 90, 27–40.CrossRefGoogle Scholar
  42. Gutting, R., & Steinwand, M. C. (2015). Donor fragmentation, aid shocks, and violent political Conflict. Journal of Conflict Resolution, 61(3), 643–670.CrossRefGoogle Scholar
  43. Han, L., & Koenig-Archibugi, M. (2015). Aid fragmentation or aid pluralism? The effect of multiple donors on child survival in developing countries, 1990–2010. World Development, 76, 344–358.CrossRefGoogle Scholar
  44. Headey, D. (2008). Geopolitics and the effect of foreign aid on economic growth: 1970–2001. Journal of International Development, 20(2), 161–180.CrossRefGoogle Scholar
  45. Heckman, J. J., Ichimura, H., & Todd, P. (1998). Matching as an econometric evaluation estimator. The Review of Economic Studies, 65(2), 261–294.CrossRefGoogle Scholar
  46. Hnatkovska, V., & Loayza, N. (2005). In J. Aizenman & B. Pinto (Eds.), Volatility and growth in managing economic volatility and crises: A practitioner’s guide. Cambridge: Cambridge University Press.Google Scholar
  47. Hoeffler, A., & Outram, V. (2011). Need, merit, or self-interest—What determines the allocation of aid? Review of Development Economics, 15(2), 237–250.CrossRefGoogle Scholar
  48. International Monetary Fund. (2012). 2011 review of conditionality—Background paper: Outcomes of IMF-supported programs. International Monetary Fund: Washington D.C.Google Scholar
  49. International Monetary Fund. (2016). The handbook of IMF facilities for low-income countries. International Monetary Fund: Washington D.C.Google Scholar
  50. Jaramillo, L., & Sancak, C. (2009). Why has the grass been greener on one side of Hispaniola? A comparative growth analysis of the Dominican Republic and Haiti. IMF Staff Papers, 56, 323–349.CrossRefGoogle Scholar
  51. Kanbur, R. (2003). The economics of international aid. In S. Christophe-Kolm and J. Mercier-Ythier (Eds.), The economics of giving, reciprocity, and altruism. North-Holland.Google Scholar
  52. Kimura, H., Mori, Y., & Sawada, Y. (2012). Aid proliferation and economic growth: A cross-country analysis. World Development, 40(1), 1–10.CrossRefGoogle Scholar
  53. Lawson, A. (2009). Evaluating the transaction costs of implementing the Paris Declaration. Concept Paper submitted by Fiscus Public Finance Consultants to the Secretariat for the Evaluation of the Paris Declaration, November.Google Scholar
  54. Knack, S., & Rahman, A. (2007). Donor fragmentation and bureaucratic quality in aid recipients. Journal of Development Economics, 83(1), 176–197.CrossRefGoogle Scholar
  55. Mascarenhas, R., & Sandler, T. (2006). Do donors cooperatively fund foreign aid? The Review of International Organizations, 1(4), 337–357.CrossRefGoogle Scholar
  56. Mercer-Blackman, V., & Unigovskaya, A. (2004). Compliance with IMF program indicators and growth in transition economies. Emerging Markets Finance and Trade, 40(3), 55–83.CrossRefGoogle Scholar
  57. Minoiu, C., & Reddy, S. G. (2010). Development aid and economic growth: A positive long-run relation. The Quarterly Review of Economics and Finance, 50(1), 27–39.CrossRefGoogle Scholar
  58. Mody, A., & Saravia, D. (2006). Catalysing private capital flows: Do IMF Programmes work as commitment devices? The Economic Journal, 116(513), 843–867.CrossRefGoogle Scholar
  59. Molenaers, N., Gagiano, A., Smets, L., & Dellepiane, S. (2015). What determines the suspension of budget support? World Development, 75, 62–73.CrossRefGoogle Scholar
  60. Morris, S., & Shin, H. S. (2006). Catalytic finance: When does it work? Journal of International Economics, 70(1), 161–177.CrossRefGoogle Scholar
  61. Moser, C., & Sturm, J. E. (2011). Explaining IMF lending decisions after the cold war. The Review of International Organizations, 6(3–4), 307–340.CrossRefGoogle Scholar
  62. Mumssen, C., Bal Gündüz, Y., Ebeke, C., & Kaltani, L. (2013). IMF-supported programs in low income countries: Economic impact over the short and longer term. No:13–273. Washington, D.C.: International Monetary Fund.Google Scholar
  63. Mundlak, Y. (1978). On the pooling of time series and cross section data. Econometrica, 46, 69–85.CrossRefGoogle Scholar
  64. Nelson, S. C., & Wallace, G. P. (2016). Are IMF lending programs good or bad for democracy? The Review of International Organizations, 1–36.Google Scholar
  65. Neumayer, E. (2003). The pattern of aid giving: The impact of good governance on development assistance. London: Routledge.CrossRefGoogle Scholar
  66. Neumayer, E. (2005). Is the allocation of food aid free from donor interest bias? Journal of Development Studies, 41(3), 394–411.CrossRefGoogle Scholar
  67. Nunnenkamp, P., Öhler, H., & Thiele, R. (2013). Donor coordination and specialization: Did the Paris Declaration make a difference? Review of World Economics, 149(3), 537–563.CrossRefGoogle Scholar
  68. OECD. (2008). The Paris Declaration on aid effectiveness and the Accra agenda for action. Paris: OECD.Google Scholar
  69. OECD. (2012). Aid effectiveness 2011: Progress in implementing the Paris Declaration. Paris: OECD.CrossRefGoogle Scholar
  70. Papageorgiou, C., Pattillo, C., Spatafora, N., & Berg, A. (2010). The end of an era? The medium- and long-term effects of the global crisis on growth in low-income countries. In IMF working papers 10/205. Washington, DC: International Monetary Fund.Google Scholar
  71. Papi, L., Presbitero, A. F., & Zazzaro, A. (2015). IMF lending and banking crises. IMF Economic Review, 63(3), 644–691.CrossRefGoogle Scholar
  72. Perry, G. (2009). Beyond lending: How multilateral banks can help developing countries manage volatility. Washington, DC: Center for Global Development.Google Scholar
  73. Robins, J. M. (2002). Comment on covariance adjustment in randomized experiments and observational studies. Statistical Science, 17(3), 309–321.Google Scholar
  74. Roodman, D. (2006). An index of donor performance. Center for Global Development, working paper no 67 (revised in 2012).Google Scholar
  75. Rosenbaum, P. R. (1987). Sensitivity analysis for certain permutation inferences in matched observational studies. Biometrika, 74, 13–26.CrossRefGoogle Scholar
  76. Rosenbaum, P. R., & Rubin, D. B. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70(1), 41–55.CrossRefGoogle Scholar
  77. Steinwand, M. C. (2015). Compete or coordinate? Aid fragmentation and lead donorship. International Organization, 69(2), 443.CrossRefGoogle Scholar
  78. Steinwand, M. C., & Stone, R. W. (2008). The International Monetary Fund: A review of the recent evidence. The Review of International Organizations, 3(2), 123–149.CrossRefGoogle Scholar
  79. Stubbs, T. H., Kentikelenis, A. E., & King, L. P. (2016). Catalyzing aid? The IMF and donor behavior in aid allocation. World Development, 78, 511–528.CrossRefGoogle Scholar
  80. Thiele, R., Nunnenkamp, P., & Dreher, A. (2007). Do donors target aid in line with the millennium development goals? A sector perspective of aid allocation. Review of World Economics, 143(4), 596–630.CrossRefGoogle Scholar
  81. White, H., & McGillivray, M. (1995). How well is aid allocated? Descriptive measures of aid allocation: A survey of methodology and results. Development and Change, 26(1), 163–183.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.International Monetary FundWashingtonUSA
  2. 2.The World BankWashingtonUSA

Personalised recommendations