The Politics of IMF Forecasts

KOF Working Paper No. 176

CESifo Working Paper Series No. 2129

41 Pages Posted: 30 Oct 2007

See all articles by Axel Dreher

Axel Dreher

Heidelberg University

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); University of Milan - Centro Studi Luca d'Agliano (LdA) ; Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

James Raymond Vreeland

Yale University - Department of Political Science

Date Written: October 2007

Abstract

Using panel data for 157 countries over the period 1999-2005 we empirically investigate the politics involved in IMF economic forecasts. We find a systematic bias in growth and inflation forecasts. Our results indicate that countries voting in line with the US in the UN General Assembly receive lower inflation forecasts. As the US is the Fund's major shareholder, this result supports the hypothesis that the Fund's forecasts are not purely based on economic considerations. We further find inflation forecasts are systematically biased downwards for countries with greater IMF loans outstanding relative to GDP, indicating that the IMF engages in "defensive forecasting." Countries with a fixed exchange rate regime also receive low inflation forecasts. Considering the detrimental effects that inflation can have under such an exchange rate regime, we consider this evidence consistent with the Fund's desire to preserve economic stability.

Keywords: IMF, Economic Forecasts, Political Influence

JEL Classification: C23, D72, F33, F34

Suggested Citation

Dreher, Axel and Marchesi, Silvia and Vreeland, James Raymond, The Politics of IMF Forecasts (October 2007). KOF Working Paper No. 176; CESifo Working Paper Series No. 2129. Available at SSRN: https://ssrn.com/abstract=1025385

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy
+39 02 64483057 (Phone)

HOME PAGE: http://https://sites.google.com/site/ssilviamarchesi/home

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

University of Milan - Centro Studi Luca d'Agliano (LdA)

Via P. Amedeo 34
Milano, Mi 20122
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

James Raymond Vreeland

Yale University - Department of Political Science ( email )

Box 208269
New Haven, DC 06520-8269
United States
203-432 6196 (Phone)
203-432 6196 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
227
Abstract Views
1,420
rank
134,684
PlumX Metrics