Economic Determinants of Fund Financial Arrangements

By Julio A. Santaella, Malcolm D. Knight

March 1, 1994

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Julio A. Santaella, and Malcolm D. Knight Economic Determinants of Fund Financial Arrangements, (USA: International Monetary Fund, 1994) accessed September 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyses empirically the economic factors that lead to approval of Fund financial arrangements. We account for both the economic variables that induce a country to seek an arrangement with the Fund ("demand-side" factors) and the macroeconomic policy commitments that the Fund considers when deciding whether to approve it ("supply-side" factors). Using a pooled sample of annual observations for 91 developing countries over 1973-1991, we obtain maximum likelihood estimates of bivariate and univariate probit equations to determine the probability of approval of a financial arrangement for a given country in a given year. A number of our chosen demand-side and supply-side variables are statistically significant determinants of the approval of a Fund arrangement, and the overall explanatory power of the equations is high.

Subject: External debt, International reserves, Probit models, Real effective exchange rates, Real exchange rates

Keywords: Balance of payments, Exchange rate, Fund arrangement, WP

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/036
Stock No:

WPIEA0361994
ISBN:

9781451977967
ISSN:

1018-5941

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