Does Adjustment Lending Work Policy Reforms in the Wake of Program Lending Joshua Loud joshua'loudgm

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Does Adjustment Lending Work? Policy Reforms in
the Wake of Program LendingJoshua
Loudjoshua.loud_at_gmail.comDaniel L.
Nielsondan_nielson_at_byu.eduBrigham Young
University
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Prior Work

• Usual Dependent Variable
• Economic Growth
• Independent Variable
• IMF (or IMF World Bank) Programs
• Results Contradictory
• Problems
• Effects too distant from causes
• Only IMF WB considered

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Our Contribution

• Bigger donor dataset
• Comprehensive Project-Level Aid (PLAID) data
• Includes IMF, WB, ASDB, IADB, AFDB, EBRD, UN,
  USA, Germany, Japan, France, etc.
• Policy dependent variables
• Inflation, Budgets, Exchange Rates

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The Argument Structural Adjustment Feckless

• Conditionality not credible
• Poverty alleviation demands future loans
• IFIs need to move money
• Our addition Conflict of interest
• Recipient countries part of collective principal
• Significant voting weights ? Collusive coalition
  building on executive boards
• Self enforcement cheap talk
• Hypothesis Adjustment loans ? no policy change

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Data Methods

• 80 countries, 1980-2000
• Pooled time-series - cross-sections
• PCSEs, AR1, fixed effects for recipients
• Dependent Variables first differenced
• Testing effects of different IFI bilateral
  adjustment packages on subsequent policies
• Each model run three ways
• Total Structural Adjustment dollars
• Adjustment dollars by donor
• Dummies indicating whether or not a loan was
  received

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Results
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Results Summarized

• On the whole, there is little evidence that
  structural adjustment projects lead to policy
  reforms.
• Robust to various specifications and is not
  driven by a few influential data points.
• Little evidence that Structural Adjustment
  projects even dampen economic policy trends, let
  alone reverse them.

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Future Iterations

• Hazard models
• Time until policy targets are achieved.
• Interaction effects
• Country size (population and GDP) x fixed effects
  for lenders
• Country size x value of projects
• IFI vote share x value of projects