The impact of IMF financial aid on economic growth and inflation
|Author:||Mgr. Valeri Covalenco|
|Year:||2017 - winter|
|Leaders:|| prof. Roman Horváth Ph.D.
|Work type:|| Masters
|Awards and prizes:|
|Abstract:||The International Monetary Fund was created to promote financial stability, global monetary
cooperation, high employment, international trade and sustainable economic growth. Together with
the World Bank, IMF has a “monopoly” on offering loan programs for countries in deep crises or
for development projects. In this thesis, we examine the effect of IMF, i.e. loan size and quotas, on
the economic growth and inflation rate, by applying a dynamic panel regression on our dataset. In
addition, we look at how the IMF Quotas influence the size of the loans. Our empirical results
display significant evidence that IMF loans influence the GDP growth in a positive manner, in the
medium term. Both Control of Corruption and Voice & Accountability have a negative influence on
the economic growth. In other words, less corruption and stronger civil rights will halt the growth
level of the economy. We also determined that IMF Quotas is not a robust indicator of the loan size.
It is only driven by the past loan levels. Regarding Inflation determinants, IMF loans are not
affecting the Inflation in a significant manner, while FDI and Control of Corruption - do. FDI
exercises a positive influence on the CPI, while perception of less corruption has a negative effect
on Inflation rate.