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The effects of IMF conditional programs on the unemployment rate
Chletsos, Michael; Sintos, Andreas
2022In European Journal of Political Economy
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Keywords :
Unemployment rate; IMF lending Programs; IMF conditionality; Structural adjustment
Abstract :
[en] The fundamental mission of the International Monetary Fund (IMF) is to ensure global financial stability and to assist countries in economic turmoil. Although there is a consensus that IMF-supported programs can have a direct effect on the labor market of recipient countries, it remains unclear how IMF participation decision and conditionalities attached to IMF loans can affect the unemployment rate of borrowing countries. Using a world sample of countries from 1980 to 2014, we investigate how lending conditional programs of the IMF affect the unemployment rate. Our analyses account for the selection bias related to, first, the IMF participation decision and, second, the conditions included within the program. We show that IMF program participation significantly increases the unemployment rate of recipient countries. Once we control for the number of conditions, however, we find that only IMF conditions have a detrimental and highly significant effect on the unemployment rate. There is evidence that the adverse short-run effect of IMF conditions holds robust in the long-run. Disaggregating IMF conditionality by issue area, we find adverse effects on the unemployment rate for four policy areas: labor market deregulation, reforms requiring privatization of state-owned enterprises, external sector reforms stipulating trade and capital account liberalization, and fiscal policy reforms that restrain government expenditure. Our initial results are found to be robust across alternative empirical specifications.
Disciplines :
Business & economic sciences: Multidisciplinary, general & others
Macroeconomics & monetary economics
Special economic topics (health, labor, transportation...)
Author, co-author :
Chletsos, Michael ;  University of Piraeus > Department of Economics
Sintos, Andreas   ;  University of Piraeus > Department of Economics
 These authors have contributed equally to this work.
External co-authors :
yes
Language :
English
Title :
The effects of IMF conditional programs on the unemployment rate
Publication date :
August 2022
Journal title :
European Journal of Political Economy
ISSN :
1873-5703
Publisher :
Elsevier, Amsterdam, Netherlands
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBilu :
since 15 November 2022

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