What Kind of Capital Flows Does the IMF Catalyze and When?

Using empirical analysis, complemented with case studies, this paper studies under which circumstances IMF programs manage to catalyze private capital flows into the countries concerned. While we found no catalysis in general, the situation differs very much depending on the type of capital flow and the program's objective. On the first, the Fund seems to be doing a better job at attracting FDI than shorter-term flows, particularly cross-border bank lending. On the second, programs oriented towards crisis prevention or with longer-term objectives, also perform better in terms of catalysis. In turn, programs oriented towards crisis resolution actually discourage private capital flows. This worrisome finding, given the importance of crisis resolution for the Fund, is mitigated for FDI inflows in the case studies analysed. Finally, all case studies point to the role of conditionality - as opposed to signalling and liquidity - as the strongest channel through which IMF catalyzes private flows