by Mahmoud Tarek Zaki
Abstract
This thesis investigates whether the composition of IMF binding conditionality matters more than its overall intensity for domestic private credit in developing countries. Using a panel of 115 countries from 1990 to 2019 and a three-equation instrumental-variables framework, the analysis disaggregates binding conditionality into prior actions, quantitative performance criteria, and structural performance criteria. The results show no robust relationship between the aggregate number of binding conditions and private credit across specifications. By contrast, prior actions and other conditions imposed before the first disbursement of funds are consistently associated with lower private credit in fixed-effects, two-stage least squares, and joint system estimations. Under the instrumental-variables specification, one additional prior action is associated with an approximately 7 percent reduction in private credit. These findings suggest that the timing and composition of IMF conditionality, rather than its aggregate intensity alone, are central to understanding how IMF program design shapes credit markets in borrower countries.
Michelle Connolly, Faculty Advisor
