Do IMF Programs Stimulate Private Sector Investment?

40 Pages Posted: 30 May 2023

See all articles by Pietro Bomprezzi

Pietro Bomprezzi

University of Milano - Bicocca

Silvia Marchesi

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

Rima Turk-Ariss

International Monetary Fund; Economic Research Forum

Multiple version iconThere are 2 versions of this paper

Date Written: May 29, 2023

Abstract

This paper investigates the dynamic aggregate response of firm investments to the approval of an IMF arrangement. Using a local projection methodology, we find that distinguishing between General Resource Account (GRA) and Poverty Reduction and Growth Trust (PRGT) financing matters for the path of investment. Following a GRA arrangement, investments start to increase after two years, while the effect is quite limited after a PRGT. Adopting a stacked difference-in-differences estimator and exploiting firm-level characteristics, we find that firms having domestic ownership, rely more on external finance, or are more subject to uncertainty, will invest more following a GRA agreement.

Keywords: IMF, Firm investment, Local Projection, Financial Frictions, Difference-in-Differences

JEL Classification: E22, F33, O19

Suggested Citation

Bomprezzi, Pietro and Marchesi, Silvia and Turk-Ariss, Rima, Do IMF Programs Stimulate Private Sector Investment? (May 29, 2023). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 520, Available at SSRN: https://ssrn.com/abstract=4461339

Pietro Bomprezzi

University of Milano - Bicocca ( email )

Silvia Marchesi (Contact Author)

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

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

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Rima Turk-Ariss

International Monetary Fund ( email )

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