A firm level approach on the effects of IMF intervention
Next ReLunch seminar: Pietro Bomprezzi (DEMS), will present
“A firm level approach on the effects of IMF intervention” (with Silvia Marchesi)
Abstract: Despite the extensive literature on the effectiveness of IMF programs, little is still known about effects at the sub-country level. Specifically, this is the first paper evaluating the effect of IMF programs at the firm level. We expect that the adoption of an IMF program may help countries regain their creditworthiness, hence releasing the firms’ financing constraints. First, we consider the signaling effect of an IMF adoption and then focus on the extent of the intervention (loan size and conditionality). Finally, we examine the redistributive effects of IMF programs by testing their impact on the labour income share. Our identification strategy exploits the differential effect of changes in IMF liquidity on IMF participation (Lang 2016). Using a panel of about 130,000 firms in 138 developing countries, over the years 2003-2018, we find a positive and persistent impact on firms’ sales growth of countries participating in an IMF program, in line with the signaling effect. Considering the extent of the intervention, we find evidence that (i) IMF lending can release the financing constraints of firms, (ii) more severe conditionality worsens firm performance in the short run, but may be beneficial in the long run. Finally, our results show that, at least in the short run firms seem to grow at the expense of the workers.
Tuesday, May 4, 12:30
Online through Webex
Fill in this form to receive the invitations to the ReLunch seminars.