The Effects of IMF Loan Condition Compliance on GDP Growth
Hackler, Lauren Taylor
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Since beginning operations in 1947 the International Monetary Fund has evolved from its original purpose of overseeing the world’s monetary system to becoming a loan administrator for member nations facing extreme economic crises. Today, the IMF provides conditional lending programs intending to catalyze economic recovery and growth in recipient countries. The success of the IMF’s conditional loans is debated. Critics cite various reasons for conditional loan programs failures, naming the borrowing countries, creditor countries, and/or the IMF itself as responsible. Using the data from 8,377 loan conditions associated with 93 countries’ IMF loan arrangements from 2000 to 2014, this paper studies the effects of complying with individual conditions on the borrowing countries’ real GDP growth rate. Our results suggest that real GDP growth rates are directly affected by meeting the compliance standards of select loan conditions.