A Firm-level Approach on the Effects of IMF Programs

This paper evaluates the effects of IMF programs at the firm level, using a panel of about 130,000 firms, over the period 2003-2018. We consider the different dimensions of a Fund program, namely participation, loan size, and number and scope of conditions, and we look at their effects on growth of firm sales, as well as on income redistribution within the firm. Our identification strategy exploits the differential effect of changes in IMF liquidity on program participation (Lang 2016). We find a positive impact of IMF programs on firms' sales growth, and the effect is persistent through time. What is more, we find that performance is improved through the alleviation of the firm financing constraint. More severe conditionality seems to worsen firm performance in the short run but then turns beneficial over the years. Finally, we find that participating in an IMF program reduces the labor income share in the short term, but employment increases, in the long run, suggesting that the increased income is reinvested into the firm