The politics of IMF forecasts

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2129

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; International Monetary Arrangements and Institutions ; International Lending and Debt Problems
• Subject: IMF ; economic forecasts ; political influence ; Wirtschaftsprognose ; Internationale Wirtschaftsorganisation ; Bias ; Prognoseverfahren ; Ideologie ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dreher, Axel ; Marchesi, Silvia ; Vreeland, James Raymond
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/26174
• Last update: 10.03.2025, 11:42 AM CET