Public Choice

, Volume 137, Issue 1–2, pp 145–171 | Cite as

The political economy of IMF forecasts

  • Axel Dreher
  • Silvia Marchesi
  • James Raymond Vreeland
Article

Abstract

We investigate the political economy of IMF forecasts with data for 157 countries (1999–2005). Generally, we find evidence of forecast bias in growth and inflation. Specifically, we find that countries voting with the United States in the UN General Assembly receive lower inflation forecasts as domestic elections approach. Countries with large loans outstanding from the IMF also receive lower inflation forecasts, suggesting that the IMF engages in “defensive forecasting.” Finally, countries with fixed exchange rate regimes receive lower inflation forecasts, suggesting the IMF desires to preserve stability as inflation can have detrimental effects under such an exchange rate regime.

Keywords

IMF Economic forecasts Political influence 

JEL Classification

C23 D72 F33 F34 

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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Axel Dreher
    • 1
    • 2
  • Silvia Marchesi
    • 3
  • James Raymond Vreeland
    • 4
  1. 1.KOF Swiss Economic InstituteETH ZürichZürichSwitzerland
  2. 2.CESifoMunichGermany
  3. 3.Department of EconomicsUniversity of Milano-BicoccaMilanoItaly
  4. 4.Department of Political ScienceYale UniversityNew HavenUSA

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