Institutional quality, macroeconomic stabilization and economic growth: a case study of IMF programme countries

The current study is motivated by the overall lackluster performance of IMF programmes in recipient countries in terms of economic growth consequences, and tries to explore the relevance of institutional determinants (that have a positively significant role in improving institutional quality in IMF programme countries, in the first place) in enhancing real economic growth in IMF programme countries; as otherwise highlighted by New Institutional Economics literature for countries generally. Moreover, the study also investigates the impact of these determinants through the channel of macroeconomic stability. Based on a time period of 1980-2010 (coinciding with a duration of increasing number of IMF programmes), the results mainly validate that institutional determinants overall play a positive role in reducing macroeconomic instability, and through it, and also independently, enhance real economic growth.