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 the financing constraint of firms as a channel of transmission. We examine the different dimensions of a Fund program, namely participation, number, and scope of conditions. We find a positive effect of IMF programs on firms' sales growth, such that average sales growth can be up to 30 percent higher in firms exposed to IMF programs, and such effect is persistent over time. Regarding the extent of the intervention, more severe conditionality seems to worsen firm performance in the short run, but then becomes beneficial over the years. Finally, we 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 dimension of international finance which needs to be further investigated