The effects of IMF lending arrangements : a study of the intentions of thInternational Monetary Fund, and the macroeconomic effects of their lending arrangementse

Abstract

The International Monetary Fund (IMF or the Fund) has been acting as an international lender of last resort, mainly supporting emerging and developing countries the last decades. After various crises hit the world economy in the second half of the 1990s, intensive criticism against the IMF has emerged, related to the macroeconomic effects of their lending arrangements. This thesis contributes to the debate on how the IMF’s lending arrangements affect their member countries in terms of macroeconomic outcomes, with emphasize on balance of payments, economic growth, and inflation. I will present a literature review, and base the conclusions of the study on secondary research available in literature. It seems to be a general consensus among researchers that the IMF, through their lending arrangements, do cause a positive effect on balance of payments and that their intervention tend to cause negative effects on countries’ economic growth, while there is no evidence found of any effects on inflation. The issue of the existence of moral hazard caused by the IMF is also closely investigated, whereof no conclusions can be drawn due to the lack of reliable methods to measure the concept.