Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175228 
Year of Publication: 
2016
Series/Report no.: 
Working Paper No. 791
Publisher: 
Queen Mary University of London, School of Economics and Finance, London
Abstract: 
This paper assesses that participation of countries in IMF programs significantly diminishes their vulnerability to external shocks. Currently, one of the primary purposes of the IMF is to ensure global stability. As such, the Fund has the responsibility of advising member countries on the financial and economic policies that promote stability, helping to avoid crises and smoothing the adjustment to exogenous shocks. We employ a Bayesian Vector Autore gressive model to obtain a measure for the exposure of countries to external shocks. We then use an Instrumental Variable approach and we show that participation in the IMF arrangements has a significant impact in decreasing the sensitivity to exogenous shocks. Despite the criticism concerning the effects of the IMF loans on the economy of the recipient country, our results provide clear evidence that the Fund is efficient in helping member countries to build a strong economic resilience. These results are of considerable in terest since shocks and crises are a systematic feature of the global economy which affects both developing and developed countries.
Subjects: 
Bayesian VAR
IMF
Spillovers
JEL: 
F33
C11
C13
C3
E3
Document Type: 
Working Paper

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