An identity crisis? Examining IMF financial programming

William Easterly

    Research output: Contribution to journalArticle

    Abstract

    The IMF uses its well-known "financial programming" model to derive monetary and fiscal programs to achieve the desired macroeconomic targets in countries undergoing crises or receiving debt relief. This paper considers under what conditions financial programming would work best, and then tests those conditions in the data. The key restrictions of financial programming are assumptions about exogeneity of some components of identities with respect to others, and the assumption of stable and "reasonable" parameters for some very simple behavioral relationships. In at least the literal applications of the framework, financial programming does not do well in forecasting the target variables, even when some components of the identity are known with certainty.

    Original languageEnglish (US)
    Pages (from-to)964-980
    Number of pages17
    JournalWorld Development
    Volume34
    Issue number6
    DOIs
    StatePublished - Jun 2006

    Keywords

    • budget deficits
    • developing countries
    • inflation
    • international monetary fund
    • macroeconomic stabilization

    ASJC Scopus subject areas

    • Geography, Planning and Development
    • Development
    • Sociology and Political Science
    • Economics and Econometrics

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