The effects of IMF and World Bank lending on long-run economic growth: an empirical analysis

The International Monetary Fund and the World Bank, frequently, and often repeatedly, extend loans to developing nations. These loans have been blamed for generating adverse economic outcomes. The growth impact of Fund and Bank loan programs is assessed using an empirical growth model that controls for other determinants of growth. A unique feature of this study is the use of the value of loans rather than the number of programs. The estimates indicate that Bank lending stimulates growth in some cases, primarily by increasing public investment. Fund lending is either neutral or detrimental to growth. The channel for this effect is a negative impact of Fund lending on public as well as private investment. Key words--development aid, empirical growth model, international lending, International Monetary Fund, World Bank