The Macroeconomic Effects of Fund-Supported Adjustment Programs: An Empirical Assessment

Abstract

This paper reviews the existing evidence on the macroeconomic effects of Fund-supported adjustment programs, and provides new estimates of these effects for 67 developing countries with programs during 1973-86. The empirical analysis indicates that in the short run programs have led to an improvement in the current account, the balance of payments, and inflation, but this was accompanied by a decline in the growth rate. In the longer run the positive effects of programs on the external balance and inflation are strengthened, and the adverse growth effects reduced. These results are more definitive than those from previous studies.

JEL Classification: 1331, 2120