FOREIGN DIRECT INVESTMENT FLOWS AND IMF LENDING PROGRAMS. NEW EMPIRICAL EVIDENCE FROM CESEE COUNTRIES
DOI:
https://doi.org/10.1515/saeb-2016-0124Keywords:
IMF, catalytic effect, FDI flows, financial crisis, Central, Eastern and South-Eastern EuropeAbstract
The aim of the paper it to assess the “catalytic effect” of IMF lending programs on foreign direct investment (FDI) flows to Central, Eastern and South-Eastern European (CESEE) countries during and after the latest global financial crisis. This paper provides new empirical evidence on this catalytic effect while controlling for banking stability. Our results show that IMF lending programs had a negative catalytic effect on FDI flows to emerging economies from CESEE over the period 1999-2013. Other key determinants of FDI flows to these countries are inflation, current account balance, level of education, and infrastructure.
JEL Codes - F33, F34, G01
References
Bauer, M. E., Cruz, C., and Graham, B. A. T., 2012. Democracies only: When do IMF agreements serve as a seal of approval? The Review of International Organizations, 7(1), 33-58. doi: http://dx.doi.org/10.1007/s11558-011-9122-9
Bird, G., and Rowlands, D., 1997. The catalytic effect of lending by the international financial institutions. The World Economy, 20(7), 967-991. doi: http://dx.doi.org/10.1111/1467-9701.00112
Bird, G., and Rowlands, D., 2001. IMF Lending: How Is It Affected by Economic, Political and Institutional Factors? Journal of Policy Reform, 4(3), 243-270. doi: http://dx.doi.org/10.1080/13841280108523421
Bird, G., and Rowlands, D., 2007. The IMF’s Role in Mobilizing Private Capital Flows: Are There Grounds for Catalytic Conversion? University of Surrey, Discussion Papers in Economics.
Bogumil, P., 2014. Composition of capital inflows to Central and Eastern Europe (CEE) — is Poland different? ECFIN Country Focus, 11(8). doi: http://dx.doi.org/10.2765/69480
Bordo, M. D., Mody, A., and Oomes, N., 2004. Keeping capital flowing: The role of the IMF. International Finance, 7(3), 421-450. doi: http://dx.doi.org/10.1111/j.1367-0271.2004.00144.x
Castejón, C. F., and Wӧrz, J., 2007. Good or Bad? The Influence of FDI on Output Growth: An industry-level analysis. WIIW Working Paper, 38.
Corsetti, G., Guimaraes, B., and Roubini, N., 2003. International Lending of Last Resort and Moral Hazard: A Model of IMF Catalytic Finance. NBER Working Paper, 10125.
Cottarelli, C., and Giannini, C., 2002. Bedfellows, Hostages or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending. IMF Working Paper, 193.
Díaz-Cassou, J., García-Herrero, A., and Molina, L., 2006. What Kind of Capital Flows Does the IMF Catalyze and When? Banco de Espana Working Paper Series, 0617.
Edwards, M., 2006. Signalling Credibility? The IMF and Catalytic Finance. Journal of International Relations and Development, 9(1), 27-52. doi: http://dx.doi.org/10.1057/palgrave.jird.1800079
Erce, A., and Riera-Crichton, D., 2015. Catalytic IMF? A Gross Flows Approach. European Stability Mechanism Working Paper, 9. doi: http://dx.doi.org/10.2852/436533
IMF, 2014. 25 Years of Transition Post-Communist Europe and the IMF. Regional economic issues special report.
Jensen, N. M., 2004. Crisis, Conditions, and Capital: The effect of International Monetary Fund agreements on foreign direct investment inflows. Journal of Conflict Resolution, 48(2), 194-210. doi: http://dx.doi.org/10.1177/0022002703262860
Laeven, L., and Valencia, F., 2013. Systemic banking crises database. IMF Economic Review, 61(2), 225-270. doi: http://dx.doi.org/10.1057/imfer.2013.12
Marchesi, S., and Thomas, J. P., 1999. IMF Conditionality as a Screening Device. The Economic Journal 109(454), 111-125. doi: http://dx.doi.org/10.1111/1468-0297.00420
Mody, A., and Saravia, D., 2006. Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices? The Economic Journal 116(513), 843-867. doi: http://dx.doi.org/10.1111/j.1468-0297.2006.01114.x
Morris, S., and Shin, H. S., 2006. Catalytic Finance: When Does it Work? Journal of International Economics, 70(1), 161-177. doi: http://dx.doi.org/10.1016/j.jinteco.2005.06.014
Papi, L., Presbitero, A. F., and Zazzaro, A., 2015. IMF Lending and Banking Crises. IMF Economic Review, 63(3), 644-691. doi: http://dx.doi.org/10.1057/imfer.2015.16
United Nations Conference on Trade and Development, 2016. UNCTADstat. Retrieved July 13th, 2016, from http://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx
van der Veer, K. J. M., and de Jong, E., 2010. IMF-Supported Programs: Stimulating Capital to Solvent Countries. De Nederlandsche Bank NV Working Paper, 244.
van der Veer, K. J. M., and de Jong, E., 2013. IMF-Supported Programmes: Stimulating Capital to Non-defaulting Countries. The World Economy, 36(4), 375-395. doi: http://dx.doi.org/10.1111/twec.12044
World Bank, 2015. World Bank Indicators. http://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS
Zwart, S., 2007. The Mixed Blessing of IMF Intervention: Signalling versus Liquidity Support. Journal of Financial Stability, 3(2), 149-174. doi: http://dx.doi.org/10.1016/j.jfs.2007.04.001
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2016 SCIENTIFIC ANNALS OF ECONOMICS AND BUSINESS
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
All accepted papers are published on an Open Access basis.
The Open Access License is based on the Creative Commons license.
The non-commercial use of the article will be governed by the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License as currently displayed on https://creativecommons.org/licenses/by-nc-nd/4.0
Under the Creative Commons Attribution-NonCommercial-NoDerivatives license, the author(s) and users are free to share (copy, distribute and transmit the contribution) under the following conditions:
1. they must attribute the contribution in the manner specified by the author or licensor,
2. they may not use this contribution for commercial purposes,
3. they may not alter, transform, or build upon this work.
This work is licenced under a 
