The International Monetary Fund (IMF) and the Catalytic Effect: Do IMF Agreements Improve Access of Emerging Economies to International Financial Markets?


  • We are thankful to our former colleagues at the Georgetown Public Policy Institute for comments. We would like to also thank an anonymous referee for helpful comments. The views expressed here are ours and should not be construed as representing the positions of other experts at institutions that any of the authors are affiliated with.


We investigate whether countries have access to loans with better conditions after an International Monetary Fund (IMF) agreement. We conduct an empirical analysis which takes into account both the maturity and the interest rate of public and publicly guaranteed private debt. A two-stage least squares estimation method is used to avoid selection bias problems. Panel data covering 116 countries between 1984 and 2007 and two other subsets of this panel data are used. The results indicate an improvement in access to international financial markets when an IMF programme is announced. The improvement increases as the sample consists of better-performing countries. We conclude that, the catalytic effect may lower the level of commitment, political will and ‘ownership’ of the programme of the borrower country. On the other hand, borrower countries should consider the catalytic effect in determining the amount of financial assistance from the IMF.