The Determinants Of IMF Lending

When a country experiences significant economic distress,they may turn to the International Monetary Fund in search of some type of relief.The aim of this study is to ascertain the determinants of loan programs,with specific focus on loan approval,loan size and loan participation rate,offered by the International Monetary Fund.The study focuses primarily on the influence of political factors on this decision-making process using General Assembly votes in the United Nations as a proxy for political closeness.The study examines the changes in these effects before and after the lending reforms of the International Monetary Fund in 2008.Political closeness explored in particular with the United States of America and Europe-which for the purpose of this study is defined as Germany,France and the United Kingdom.The Stand-By Agreement and the Extended Fund Facility were chosen as the loans of interest for this study since they represent the largest share of funds disbursed by the International Monetary Fund.The data is an unbalanced panel and spans 40 years from 1975-2015 with most variables being collected in five-year intervals.Using a Probit and censored Tobit models to estimate it was found that the influence of politics on the decision-making process of the International Monetary Fund was significant before and after the reforms of 2008 particularly on loan approval and loan participation rates.