THE EFFECT OF INTERNATIONAL MONETARY FUND ARRANGEMENTS ON INTERNATIONAL CAPITAL FLOWS – OVERVIEW OF BASIC TENETS AND ACADEMIC FINDINGS

The paper gives overview of basic tenets and academic findings regarding the effect of IMF financial arrangements on international capital flows, with a view to creating good-quality foundations for debate and making informed and scientifically-based policy decisions. Countries usually enter IMF arrangements when they have not been able to finance current account deficits by means of foreign capital inflows. In such circumstances, one of the key tasks is to instigate new foreign capital inflows and alleviate respective outflows. IMF itself has traditionally claimed that its programmes have catalytic effect in this respect. However, systematic review of the existing empirical studies points towards very nuanced results. This highlights the danger of generalisations as it appears that empirical analyses on larger samples do not corroborate the thesis about strong and consistent IMF catalytic effect on international capital. If such findings are not duly taken into account, it can exacerbate economic, financial and political issues in user-countries and IMF itself. The paper’s contribution lies primarily in giving succinct picture of the subject, making critical overview of the existing studies, defining underlying trends with their possible implications and identifying potential new venues for deeper analysis and understanding of this complex phenomenon. Its overview of scientifically based notions and findings contributes not only to academic literature, but will be also valuable for policy decision-makers, investors and general public.