The International Monetary Fund is a lender of last resort to countries that have looming economic crises. The IMF would lend to these countries, on the condition that the money will be used to restore balance in the system, and that macroeconomic objectives would be attained.
These “macroeconomic objectives” are not imposed, but rather, set in consultation with national authorities. Country authorities then commit, or own up to the objectives agreed by the two parties. Ownership is thus defined by the IMF as
“a willing assumption of responsibility for an agreed program of policies, by officials in a borrowing country who have the responsibility to formulate or carry out these policies, based on an understanding that the program is achievable and is in the country’s own interest. (IMF, 2001)”
It has been observed, however, that the main reason for failure to repay IMF lending arrangements is that governments are not committed to fulfill the obligations that they themselves have set (Boughton 2003). It may be perhaps due to government instability, i.e. “it’s the next administration’s problem, let them deal with it!” and other factors in the political economy.
My goal is to validate this claim. Using a set of macroeconomic and political variables, what factors determine government commitment to fulfill to its obligations to the IMF?
I used logistic regression, random forest, and KNN. The results are in the Python Notebook.
Sources:
IMF 2001. Strengthening Country Ownership in Fund-Supported Programs.
Boughton, James 2003. Who’s in Charge? Ownership and Conditionality in IMF-Supported Programs.
