Foreign Direct Investment Flows and IMF Lending Programs. New Empirical Evidence from CESEE Countries

Open access

Abstract

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.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • 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

Search
Journal information
Metrics
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 238 66 5
PDF Downloads 152 54 8