Association for Public Policy Analysis & Management

Research Question: Does the existence of agreements between the International Monetary Funds (IMF) and Least Developed Countries (LDCs) affect the economies of those LDCs?

Purpose & Abstract: The purpose of this project is to determine the areas in which IMF-initiated Structural Adjustment policies have a negative and/or positive effect on LDCs. Because the IMF is one of the primary sources for development funding to the developing world, it is important to understand which areas the structural adjustment policies have a positive impact and which have a negative impact on the LDCs. Then, when we have this information, we can begin explore some policy recommendations for the IMF that can help readjust their impact on LDCs to become more positive and efficient.

This project will explore the effects that structural adjustment policies initiated by the IMF have had on LDCs. When this data is gathered and a statistical analysis is performed, we will begin to understand both the current complications as well as successes that the IMF has encountered when dealing with LDCs. The IMF loans billions of dollars to LDCs in order to aid economic development. Therefore, if this study shows that structural adjustment policies have no bearing on the development of the countries studied, the results will still be relevant.

Null Hypothesis: The existence of IMF agreements with LDCs has no effect on the economy of LDCs.

Alternative Hypothesis: The existence of IMF agreements with LDCs does have an effect on the economy of LDCs.

Indicators: Exchange rate, interest rate, balance of payments, unemployment rate, GDP per capita, Human Development Index, income inequality (GINI coefficient), poverty rates, net trades in goods and services.

Method: The Unit of Analysis for this study is Least Developed Countries (LDCs). I will gather data on the indictors listed above for the three countries. I will choose these countries by taking a random sample of all LDCs, as they are classified by the U.N. I will randomly choose 10 countries, and then narrow that list down to the three LDCs that have the most complete data on the indicators I have chosen for this study.

Then, I will gather data on the indicators I have chosen for each country in this study. This data will be gathered from the World Bank. I will also gather data on the years in which IMF agreements are in place with the LDCs chosen. This information is available on the International Monetary Fund’s Website.

I will code years in which there is an IMF agreement in place with a 1, and will code years in which there is not an IMF agreement in place with a 0. Then I will run regressions on each of the indicators and their relationship to IMF agreements to determine the effect these agreements have had on the economies of the LDCs chosen for this study. I will use their p-values and r-squared values to determine the strength and direction of the correlation between IMF agreements and economic indicators in LDCs.