A firm level approach on the effects of IMF programs

This paper evaluates the effects of IMF programs at the firm level and considers the role of firm financing constraints as a channel of transmission. We examine different dimensions of a Fund program, namely participation and scope of conditionality. We find a positive effect of IMF programs on firms’ sales growth, such that average sales growth can be up to 26 percent higher in firms exposed to IMF programs, and such effect is persistent over time. We also find evidence that the firms’ financing constraint plays a role in the transmission of effects, and alleviation of these constraints improves performance. This paper, aside from providing new evidence on the effectiveness of IMF programs, brings attention to the role (and effectiveness) of official intervention, an important but under-analyzed dimension of international finance.