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Open access
Date
2007-10Type
- Working Paper
ETH Bibliography
yes
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Abstract
Using panel data for 157 countries over the period 1999-2005 we empirically investigate the politics involved in IMF economic forecasts. We find a systematic bias in growth and inflation forecasts. Our results indicate that countries voting in line with the US in the UN General Assembly receive lower inflation forecasts. As the US is the Fund's major shareholder, this result supports the hypothesis that the Fund's forecasts are not purely based on economic considerations. We further find inflation forecasts are systematically biased downwards for countries with greater IMF loans outstanding relative to GDP, indicating that the IMF engages in "defensive forecasting". Countries with a fixed exchange rate regime also receive low inflation forecasts. Considering the detrimental effects that inflation can have under such an exchange rate regime, we consider this evidence consistent with the Fund's desire to preserve economic stability. Show more
Permanent link
https://doi.org/10.3929/ethz-a-005476320Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
Economic Forecasts; Political Influence; INTERNATIONAL MONETARY FUND; INTERNATIONALER WÄHRUNGSFONDS; IMFOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
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