Stress testing is a useful and increasingly popular, yet sometimes misunderstood, method of analyzing the resilience of financial systems to adverse events. This paper aims to help demystify stress tests, and illustrate their strengths and weaknesses. Using an Excel-based exercise with...

The paper reviews the Poverty Reduction Strategy (PRS) approach and efforts to build institutional statistical capacity to permit evidence-based monitoring of the Poverty Reduction Strategy Papers (PRSPs). Integrating the PRS approach and statistical development strategies could provide...

The design of the optimal sovereign insurance contract is analyzed when: the sovereign chooses the contract; effort is not contractible; shocks are of uncertain magnitude; the sovereign can save; and the sovereign can default. Under these conditions: i) an ex ante premium leads to higher coverage;...

This paper examines the effects of IMF financial assistance on economic governance in developing countries, based on panel data analyses of perceived governance indicators. It uses a two-stage approach to address possible endogeneity issues. The results show that successful implementation of IMF...

“Program numbers” from a sample of IMF-supported programs are studied as if they were forecasts, through statistical analyses of the relationship between projections and outcomes for growth, inflation, and three balance of payments concepts. Statistical bias is found only for projections of...

We examine the cyclical properties of development aid using bilateral data for 22 donors and over 100 recipients during 1970?2005. We find that bilateral aid flows are on average procyclical with respect to business cycles in donor and recipient countries. However, they become countercyclical...

Designing appropriate governance structures for an international financial institution such as the IMF is difficult, because steps to enhance the legitimacy of such an institution through constraints on its decision-making process may affect its operational efficiency. Potential trade-offs...

This paper proposes a framework to check for consistency between the IMF's standard country surveillance tool, namely medium-term projections of the macroeconomic framework (including the real, fiscal, external, and monetary sectors), and the financial sector. Consistency here entails that the...

We survey quantitative fiscal conditionality in selected sub-Saharan African PRGFsupported programs, and assess the conditionality against some possible benchmarks and best practices. While noting many caveats, the paper suggests some possible scope for further attuning of this conditionality to...