IMF lending in the MENA indebted countries.
Abstract:
This paper examines the economic and the political factors that are considered key elements of the eligibility for IMF credit program in MENA region. Using OLS techniques with unbalanced panel data, debt indicators such as external debt, debt service, and debt arrears and other macroeconomics indicators such as inflation, output growth, exchange rate and political indices such as democracy, durability of the government and persistence of the regime showed important factors that the IMF takes in consideration when crediting a debtor country.

JEL classification: F34, C33

Keywords: IMF, MENA region, National Debt, Panel Model

Subject:
Loans (Forecasts and trends)
Public debts (Forecasts and trends)
Developing countries (Economic aspects)
Authors:
Zeaiter, Hussein F.
Abdallah, Wissam
Harajli, Najwa M.
Pub Date:
09/01/2010
Publication:
Name: Journal of International Business and Economics Publisher: International Academy of Business and Economics Audience: Academic Format: Magazine/Journal Subject: Business, international; Computers Copyright: COPYRIGHT 2010 International Academy of Business and Economics ISSN: 1544-8037
Issue:
Date: Sept, 2010 Source Volume: 10 Source Issue: 3
Topic:
Event Code: 200 Management dynamics; 010 Forecasts, trends, outlooks Computer Subject: Company business management; Market trend/market analysis
Product:
Product Code: 6002000 Lending Services; 9100048 National Government Liabilities & Debt NAICS Code: 5222 Nondepository Credit Intermediation; 92113 Public Finance Activities
Organization:
Organization: International Monetary Fund
Geographic:
Geographic Code: 0DEVE Developing Countries; 70MID Middle East; 60NOR Northern Africa
Accession Number:
243876941
Full Text:
1. INTRODUCTION

The International Monetary Fund (IMF) was created in July, 1944 as an international organization following World War II with 45 member countries. Currently, the IMF has 186 member countries. The main goal of the IMF is to support global financial system and ease economic and political risk such as surrendering economic sovereignty, exchange rate, having sustainable growth, etc. Also, IMF provides loans mainly to least developed countries with support financed from the member countries.

Countries which receive support from the IMF are required to embark on changes which are termed as Structural Adjustment. The Conditionality that the IMF imposes through the Structural Adjustment requirements is a set of conditions of economic measures which the indebted country should implement for the IMF to extend funding facilities. The set of conditions among others are reducing governmental control, deflating the country's exchange rate, putting in place programs to combat inflation and opening the country's market to foreign investments.

A frequent problem to all developing countries is their inability to have sustainable economic growth and secured capital inflow. Those countries of the Middle East and North Africa, the so-called MENA region are no exception. The MENA Region countries have experienced severe economic problems and increasing political difficulties since 1970s. In the late 1970s and early 1980s, these problems reached dangerous levels similar to many developing countries which led to many "Debt Crisis" in which most MENA region countries were unable to meet their debt obligations. Figure 1 shows the total external debt GDP ratio in the MENA region from 1970 till 2007.

The IMF lending increased rapidly during the 1970s as shown in the Figure 2. The main cause of this increase is the supply shock caused by the OPEC oil embargo in 1973. In additions to the high trade and budget deficits that were caused by oil supply shock, poor government policies worsened the problem. What makes the problems deteriorate in the MENA region, the Lebanese civil war, the Arab-Israeli war, the Sahara war in Morocco. These war conditions were contributing factors to the debt crisis in the MENA region. The IMF stood readily to intervene and help the troubled countries handle their debts, the trade deficits and the payments imbalances.

Figure 3 presents the magnitude of the loan facilities provided by the IMF from 1970 to 2007. The IMF funding growth steadily rose to peak in the new millennium and has sharply fallen since then. Figure 4 provides the share of each of the recipient country in the MENA region with Lebanon with lowest lending 0.16% and Algeria with the highest lending 39.43% extended by the IMF. It is worth noting that the IMF fund facility extension for the IMF in the MENA region accounts for nearly 55 billion $US representing 0.8% of the 6.6 trillion $US facility extended by the IMF for the entire world.

[FIGURE 1 OMITTED]

This study seeks to examine the determinants of MENA's countries eligibility for IMF Credit program. The paper addresses the political and economic factors that affect the likelihood that MENA's indebted countries receive IMF credit or sign an agreement with the Fund. The IMF credit is used as a dependent variable (IMFDEBT). The USE OF IMF denotes the "repurchase obligations to the IMF with respect to all uses of IMF resources (excluding those resulting from drawings in the reserve)". Another form of the IMF credit is used as a dependent variable (IMFDUMMY) to permit comparison with the previous approach. The dummy variable takes the value of 1 in case of IMF intervention in a specific year and 0 otherwise. The key contribution of this research is to determine within the same study, the two approaches of continuous and discrete models pertaining to an improved set of economic and political parameters which are correlated with the IMF lending in the MENA region. A new political index which is used that measures democracy and regime sustainability. Unlike most of previous works that depend on a global framework with mostly economic and some political determinants, this paper is specific to the MENA region with varied income classification. We find that the continuous model provides a better forecast of IMF lending in the MENA region and that the democracy parameter does induce confidence for the IMF to extend loan facilities and arrangements.

The other sections are organized as follows. The next section presents a summary and a review of the related literature. Section 3 explains the data methodology and descriptive statistics, section 4 discusses the results and section 5 concludes.

2. LITERATURE REVIEW

Most of the economists emphasize the conditional intervention and arbitrary nature of the IMF lending to the less developed countries (LDCs). They have perceived that the IMF funding induces a new capital flow to LDCs and in fact has an arbitrary nature to the funds allocations. Rowlands (1996) examines the effect of the IMF on less developed countries' (LDC) capital flow. The author indicates that "The overwhelming majority of early investigators concluded that the IMF was able to induce new capital flows to LDCs through the use of its conditional lending agreements". The author found that excessive debt appeal to extending loans and that older stand-by and extended Fund facility agreements induce new lending to LDCs.

Jha and Saggar (2001) argued that the financing role of the IMF to be central to the international monetary system of the less developed countries. The authors found that (1) the reliance on IMF loans is steadily increasing for developing countries and has been falling only for OECD countries, (2) The response of IMF loans to macroeconomic variables of different countries varies considerably, and (3) The key macroeconomic magnitudes for determining IMF loans sometimes are insignificant and provide wrong signs. They conclude that there exists arbitrariness in IMF loan programs

Chandavarkar (2002) claimed that the IMF acting as a crisis manager is not accurate. The IMF, as the author stated, has been acting as the last alternative. This contradicts its original objective and indicates that the Fund was never been intended as the last option. The author questioned the need of having the IMF act as a last resort and whether the IMF should be reconstituted to achieve such an objective.

Swedberg (1986) argued that both organizations, the IMF and the World Bank, are controlled by the United States and the European Union and the decisions as well as the conditions that are issued by these organizations are purely political. He summarizes the conditions of the IMF as: (1) reducing import powers, (2) deflating the currency exchange, (3) undertaking anti-inflationary measures and (4) opening of the market to the multi-national companies (MNCs). The author concludes that the policy of neutrality serves the IMF and World Bank own interests as organizations and in particular the interests of the powerful nations. It also serves some third world countries to hide behind when they announce the application of strictness measures regarding their balance of payment and other macroeconomic data.

Khan (2003) argued that the policies set by the IMF are designed to facilitate the interest of the multinational companies (MNCs). Khan focuses in his study on the IMF conditions set for Structural Adjustments loans offered to Pakistan and its influence on shaping the country economy and politics. The author states that the conditions imposed on developing countries make the poor poorer and the government hides behind the IMF fund conditions whenever they impose strict economic recovery measures. Khan indicates some form of corruption is accompanied with the IMF loans to Pakistan which will damage the life standard of future generations.

Feldstein (1998) criticized the IMF intervention policies and how the structural changes interfere with the policies that should be kept to autonomous governments. Asian and Mexican crisis were main examples. The IMF monitored structural adjustments of the governments of these nations which in an effort to be able to meet their obligations to the lending banks raised taxes, cut government spending and tightened credit. This approach succeeded because it was recognized that this problem was that of liquidity and not insolvency. Feldstein indicates that the IMF traditional remedy of reduced government spending, higher taxes and tight credit that were adopted by these countries are ineffective.

Santaella (1996) examines the initial economic conditions before the commencement of the IMF loans using 105 IMF arrangements in 74 developing countries. Santaella (1996) finds that there are significant differences between countries that are about to undergo IMF programs and those of a control sample. The sample countries have weaker balance of payments, output growth, external conditions, and fiscal and credit policies than the control sample. Furthermore, IMF program countries are characterized with higher external indebtedness and nominal exchange rate depreciation.

Aylward and Thorne (1998) examine the macroeconomic variables nature which relate to the performance of IMF member country's repayment. Using a sample of 138 developing countries, the authors find that countries count for IMF arrears is less than those who have failed to pay their debt and the importance effect is political instability.

B J (1980) examines the primary fears of the developing countries that have no oil revenues. These fears are: (i) the ideological bias, (ii) the content of the stabilization program, (iii) the period of adjustment, and (iv) the performance tests. According to the author, some programs affect more the lower income people of the society and tend to benefit the higher income. Also the author criticizes the period of adjustment that the IMF requires to implement the conditionality that it is too short for many countries to accommodate.

Sturm et al. (2005) state that despite the extensive research being performed, there exists arbitrariness in the influential variables that govern IMF lending. The principal conclusion of their research was that the IMF lending is affected by poli-economic factors to a lesser degree and the most influential factor of political variables is the election.

[FIGURE 2 OMITTED]

3. DATA, METHODOLOGY AND DESCRIPTIVE STATISTICS

To examine the effect of the political-economic factors on MENA region, we employ economic and political indicators for representative sample of low Income, middle lower and middle upper income countries from the MENA region. The list of the selected countries and their classification is given in table 1 and include Yemen, Lebanon, Morocco, Egypt, Djibouti, Iran and Tunisia. The other countries of the region are excluded owing principally to being oil rich states such as the Gulf Countries in which no credit has been extended to any of the Gulf countries since 1970. We apply ordinary least square (OLS) method to a set of unbalanced panel data of eight MENA region countries covering a range of 37 years (1970-2007).

3.1 The Dependent Variable

The ratio of the IMF credit to the debt stock is used as a dependent variable in this study. This variable is a continuous measure that refers to the size and extent of the IMF loans.

3.2 The Explanatory Variables

The following explanatory variables are used in this study: the total External Debt ratio to GDP(DEBTGDP), the percentage change of the Gross National Product (GNPPERC), debt Service, or the total of principal and interest payments (SERVDEBT), Inflation (INFLATION), official exchange rate which is US dollars per unit of national currency (OFFEXRATE), the real interest rate (LENDINGRATE) which is charged locally by the banks, the current account balance ratio to exports (CABEXPORTS) and the money/quasi Money ratio to gross domestic product (MONEYGDP), The ratio arrears comprising the principle and interest arrears to the external Debt (ARREDSL), and a political index (POLINDEX). This POLINDEX comprises the sum of three principle measures of political stability including Democracy (DEMOC), Durability (DURABLE), and Persistence (PERSIST). The three political measures are adopted from Marshall (2009). The definition of economic and political variables and their expected signs are summarized in Table 2.

[FIGURE 3 OMITTED]

The following models are estimated as follows for each country (i) at time (t).

[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] Eq.(1)

Equation 2 is built using a discrete measure of the dependent variable. This measure takes the value 1 in case there is an IMF credit to the country and 0 otherwise.

[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] Eq.(2)

Table 3 displays the descriptive statistics for the dependent and independent variables used in our study. The mean value of the IMFDEBT is 0.0168 signifying that 1.7% of the MENA's debt is credited by the IMF. The minimum value during the years 1970 to 2007 was 0 indicating that no IMF fund was extended, whereas the maximum value is 10% for Yemen during 1976. The mean of the DEBTGDP is about 0.473 suggesting that the debt incurred by the selected MENA region countries is 47.3% of its GDP while the minimum/maximum range varied between 0 as minimum and 1.815 or (181%) as maximum. Jordan has the maximum ratio of debt to GDP within the MENA region in the year 1991. On the other hand, the SERVDEBT for the selected MENA region countries ranged from 0.0088 to 0.84 with a mean value of 0.14 with Iran has the highest SERVDEBT in the 1999. The GNPPERC representing the percentage change of the Gross National Product ranged from 0 to 253.2 with a mean of about 57.77. The country with the highest percent change in its GNP is Jordan during 1991.

The change in the inflation for the selected MENA countries ranged from a -2.4 (about -2.4%) to 487.5 or (about 490%) with a mean of 14.28. This represents about 14% change in annual inflation. The country with the highest inflation is Lebanon in 1987. Djibouti has a negative inflation during 1982.

As for the political variables, the mean value of the democracy measure (DEMOC) is 0.656. Lebanon records the highest DEMOC index of "8" in 2005. Morocco has the second highest durable index with 42 and Jordan comes third at 31. The mean of the DURABLE index is 14 for the representative MENA countries. PERSIST is a similar indicator to DURABLE but differs in that it does not constrain the change in the Polity index to 3 points. Whenever there is an appreciable change, then the PERSIST index is reinitialized to null, and the number of years are then appended. Accordingly, PERSIST reflected a lower number than DURABLE. The maximum PERSIST value is 28 years recorded by Egypt again, while Morocco and Jordan record 9 and 14 years, respectively. The mean value of PERSIST for the selected MENA region for 1970 to 2007 is 7 years. The POLINDEX is the sum of DEMOC, DURABLE and PERSIST indices. The mean value of POLINDEX is 22.6 for the representative MENA region countries. The maximum value of POLINDEX is 80 for Egypt.

Table 4 presents the correlation matrix for our economic and political variables. A careful analysis of these correlation reveals that the variables are weakly correlated indicating that the selected variables are considered adequate for our analysis.

4. RESULTS

Table 5 presents five different models in which a continuous measure of the dependent variable is used. This type of the dependent variable measures the size of the IMF credit. These models differ in the political variable used. The debt ratio has a negative relationship with the ratio of IMF credit to the debt stock. The reason is the high risk emerged when the IMF credit a high debt ratio country. The GNP per capita shows high significance with a positive sign. This shows that the per capita output is a good factor for the IMF credit. Models 1 and 2 in table 5 show that SERVDEBT is positive whereas the coefficient of the variable has opposite sign in models 3, 4 and 5 when DURABLE and PERSIST enter in the regression one at a time, and the political variables are lumped in POLINDEX. In unreported results we run the regression results without the political variables, we find that the SERVDEBT exhibit a negative coefficient in line with the regression analysis with lumped political parameters and when each of the DURABLE and PERSIST is added to the regressions one at a time. Only when the DEMOC variable is introduced does the SERVDEBT parameter coefficient changes sign and becomes positive indicating that the democracy in a country permits the IMF to extend a fund whenever there is an increase in its debt service.

As expected, INFLATION is significant and has a negative sign. The higher the inflation of a country, the IMF becomes more reluctant to offer credit. Moreover, having high inflation is considered a sign of uncontrollable economy. Official exchange rate, OFFEXRATE, has the expected negative sign. Only model 1 shows significance power in which the political indices are aggregated. Devaluating domestic currency is one of the main conditions of the IMF to offer credit. The coefficients on lending rate (LENDINGRATE) and current account balance ratio to export (CABEXPORT) have the expected signs but they don't show to be important factors for the IMF. On the other hand, all models show a negative influence of (MONEYGDP) to the IMF credit due to the inflationary effect of expansionary monetary policy into the economy. The ratio of debt arrears to external debt stock, (ARRESDL), is negatively associated with the willingness of the IMF to extend loan facilities. Having high arrears to external debt ratio will not help the debtor country to get an approval on the IMF loans. This shows inability of the debtor country to manage its external debt.

Democracy variable (DEMOC) shows a positive influence on the IMF decision to credit countries in the MENA region. However, the durability of a regime (DURABLE) shows a negative effect with high significance. Due to the type of regimes in the MENA region, regimes are durable but no democratic; they last for longer periods which create uncertainty to the IMF. Individually and collectively, the political indices show significant effects.

Table 6 shows the results of the models in which a discrete dependent variable (IMFDUMMY) is used that takes a value 1 in case there is an IMF credit to the country at time t and zero otherwise. Different from the continuous measure of the dependent variable, the discrete type measures the whether the country is eligible for such credit or not.

Using a discrete dependent variable provides different results in terms of the coefficients and the significance of the variables. Inflation and debt arrears show the most influential variables on the agreement of IMF credits in the MENA region. The result shows that the IMF's main concern to provide indebted countries with loans is to have a rational debt management and a more controllable inflation.

5. CONCLUSION

In this paper we examine the financial and political variables that affect the IMF lending decision to the MENA region. The aim of the paper is to respond to a central question: to what extent the political-economic aspects affect the chance that MENA's indebted countries receive IMF credit.

Using a sample of eight MENA countries comprising, low income, middle lower income and middle upper countries, and data covering 37 years (1970-2007). Economic indicators such as debt arrears and inflation; political indices such as democracy, durability of the government and persistence of the regime are all important factors that the IMF takes in consideration when it comes to take a decision to provide credit to a country in the MENA region. Regarding the size of the loan, the growth of the output and the money stock are important in addition to the debt arrears, inflation and the political indices individually and collectively. Secondly, the continuous model shows more significant effect then using a discrete dependent variable. Correct signs are shown in the results.

REFERENCES:

Aylward, Lynn and Thorne ,Rupert, (Dec., 1998), "Countries' Repayment Performance Vis-a-Vis the IMF: An Empirical Analysis", Staff Papers - International Monetary Fund, Vol. 45, No. 4, pp. 595-618.

B. J., (Nov. 22, 1980), "Conditionally and the Role of the IMF", Economic and Political Weekly, Vol. 15, No. 47 pp. 1983-1985+1987-1988.

Chandavarkar, Anand, (Sep. 7-13, 2002), "Is the IMF a Lender of First or Last Resort?", Economic and Political Weekly, Vol. 37, No. 36 p. 3699.

Feldstein, Martin, (Mar.-Apr., 1998), "Refocusing the IMF", Foreign Affairs, Vol. 77, No. 2 pp. 20-33.

Khatkhate, Deena, (Oct. 19-25, 2002), "IMF and Developing Countries ", Economic and Political Weekly, Vol. 37, No. 42 pp. 4250+4340.

Khan, Shahrukh Rafi, (Nov. 2-15, 2002), "IMF Conditions Stunt Growth Source", Economic and Political Weekly, Vol. 37, No. 44/45, pp. 4541-4544.

Jha, Raghbendra and Mridul K. Saggar, (Sep. 8-14, 2001), "Determinants of Sovereign Borrowings from IMF ", Economic and Political Weekly, Vol. 36, No. 36 pp. 3467-3471.

Monty G. Marshall, Keith Jaggers "Polity IV Project, Political Regime Characteristics and Transitions, 1800-2007, Dataset Users' Manual Center for Global Policy, School of Public Policy, George Mason University, and Center for Systemic Peace, 2009, www.systemicpeace.org/polity4

Rowlands, Dane, (Apr., 1996), "New Lending to Less Developed Countries: The Effect of the IMF", The Canadian Journal of Economics / Revue canadienne d'Economique, Vol. 29, Special Issue: Part 2, pp. S443-S447

Swedberg, Richard, (Dec., 1986), "The Doctrine of Economic Neutrality of the IMF and the World Bank", Journal of Peace Research, Vol. 23, No. 4, pp. 377-390.

Santaella, Julio A., (Sep., 1996), "Stylized Facts before IMF-Supported Macroeconomic Adjustment", Staff Papers - International Monetary Fund, Vol. 43, No. 3 pp. 502-544.

Hussein F. Zeaiter, Lebanese American University, Beirut, Lebanon

Wissam Abdallah, Lebanese American University, Beirut, Lebanon

Najwa M. Harajli, Lebanese American University, Beirut, Lebanon

Dr. Hussein F. Zeaiter: Earned his Ph.D. from University of Wisconsin, Milwaukee in 2008. He is an assistant Professor of Economics at the Lebanese American University (LAU).

Dr. Wissam Abdallah: Earned his Ph.D. from University of Manchester Institute of Science and Technology. He is an assistant Professor of Finance at the Lebanese American University

Mrs. Najwa M. Harajli: Earned her MBA from Lebanese American University in 2010.
TABLE 1: MENA REGION COUNTRIES INCLUDED IN THE ANALYSIS

Country          Category

Yemen       Lower Income
Djibouti    Lower Middle Income
Egypt       Lower Middle Income
Iran        Lower Middle Income
Jordan      Lower Middle Income
Morocco     Lower Middle Income
Tunisia     Lower Middle Income
Lebanon     Upper Middle Income

TABLE 2--EXPECTED EFFECTS OF THE EXPLANATORY VARIABLES

EXPLANATORY        EXPECTED
VARIABLES           EFFECT     REMARKS

DEBTGDP               -        External Debt to GDP ratio. We expect
                               that higher debt makes IMF more
                               reluctant to intervene.

GNPPERC               +        The percentage change of the Gross
                               National Product. This represents the
                               financial health of a country

SERVDEBT              +        Debt Service which is the sum of
                               principal and interest obligation. We
                               expect the higher the debt level the
                               higher the demand for borrowing.

INFLATION             -        The change in Consumer Price Index. As
                               inflation rises, the IMF will not
                               intervene to curtail higher inflation.

OFFEXRATE             -        This is the official exchange rate (US
                               Dollars per unit of national
                               currency). The country's devaluation
                               of its currency is considered a risky
                               investment.

LENDINGRA IE          +        The lending rate is the interest rate
                               charged by banks locally.
                               Developing countries in general try to
                               increase their interest rate when they
                               borrow money domestically.

CABEXPORTS            -        The ratio of current account balance
                               to exports. An improving current
                               account position reduces the
                               dependence on IMF facility.

MONEYGDP              -        Money/Quasi Money ratio to GDP. The
                               higher the stock of money (M2), the
                               less likely that the IMF extends loan
                               facility as the probability of
                               repayment default will increase.

ARREDSL               -        The ratio Arrears comprising the
                               principle and interest arrears to the
                               External Debt. Loan defaults inhibit a
                               country's capacity to repay extended
                               loans.

Political index   The effect   The polity system record many
(POLINDEX).       depends on   variables as reported under the Polity
                  the index    IV project (see Marshall, 2009).The
                    used.      principle variables are:

                               Democ which is a measure of
                               Institutionalized Democracy [range 0
                               to +10] where 0 indicates the minimum
                               level of

                               Democracy and +10 the highest level of
                               Democracy.

                               Autoc correspond to Institutionalized
                               Autocracy [range 0 to -10] where 0
                               indicates low level of autocracy and
                               -10 the highest level of autocracy.

                               Polity is the difference of Autocracy
                               and Democracy measure [Democ-Autoc],.
                               Its scale range from +10 to -10.

                               Durable is a measure of durability of
                               a regime when Polity change is greater
                               than three. For example, let us assume
                               at year (X), the Democ variable was 8
                               (relatively democratic) for country
                               (i) while, the Autoc measure was 0.
                               The Polity is then 8-0=8. For the
                               first year of such measure, the
                               durable is set at one (being first
                               year of measure). If Democ remains 8,
                               autoc is 0 again for next year, the
                               polity is then 8, and durable is
                               appended by one to be now 2, and so on
                               3, 4, 5 ... as long as the polity is
                               below 3 points change. Once polity
                               changes to 5 or below (i.e. by 3
                               points or more), the durable counter
                               is re-initialized to 1.

                               Persist which is a measure of how long
                               the polity is maintained in its
                               current status without any appreciable
                               change. It is reflected in a similar
                               explanation as Durable with the
                               exception that the change in the
                               Polity index is not restricted to 3.

                               The POLINDEX comprises the sum of
                               three principle measures of political
                               stability including Democracy (DEMOC),
                               Durable or a measure of how long the
                               regime continues without marked
                               changes in its political measure
                               (DURABLE), and Persist which account
                               for any change in the components
                               measuring of the political index
                               (PERSIST).

TABLE 3--DESCRIPTIVE STATISTICS

               N       MEAN        MINIMUM       MAXIMUM      STD DEV

IMFDEBT       293   0.0168665         0         0.1020443    0.0256758
DEBTGDP       247   0.4732691         0         1.8156186    0.3301309
GNPPERC       241   57.7728050        0        253.2138566   40.7180765
SERVDEBT      293   0.1406858     0.0087765     0.8381827    0.1091349
INFLATION     222   14.2894301   -2.4107143    487.5781409   35.2789314
OFFEXRATE     283   0.6736877    0.000107745    3.3565495    0.9366459
LENDINGRATE   127   0.0010685    -0.5120757     0.6449447    0.1330010
CABEXPORTS    197   -0.0801444   -0.9917535     0.4958045    0.2343759
MONEYGDP      249   66.9599525   22.0949174    231.8987180   39.0307296
ARREDSL       293   0.0680573         0         1.0980597    0.1626499
POLINDEX      259   22.6254826        0        80.0000000    16.5658975
DEMOC         262   0.6564885         0         8.0000000    1.3800494
DURABLE       277   14.1913357        0        52.0000000    12.9803166
PERSIST       259   6.8880309         0        28.0000000    6.3745354

TABLE 4--CORRELATION MATRIX

            IMFDEBT      DEBT      GNPPE       SERV     INFLATION
                         GDP         RC        DEBT

IMFDEBT      1.0000
              293

DEBTGDP     0.25268     1.0000
            <0.0001
              238        247

GNPPERC     0.22596    0.98420     1.0000
             0.0005     <.0001
              232        241        241

SERVDEBT    -0.28037   -0.42622   -0.37739    1.0000
            <0.0001     <.0001     <.0001
              293        238        232        293

INFLATION   -0.13052   -0.08747   0.03014    0.15390     1.0000
             0.0578     0.2192     0.6749     0.0250
              212        199        196        212         222

OFFEX       0.06948    0.11997    0.11756    -0.16161   -0.13212
RATE         0.2526     0.0603     0.0691     0.0075     0.0498
              273        246        240        273         221

LENDING     -0.00920   0.13649    0.18906    -0.05858    0.50367
RATE         0.9182     0.1355     0.0430     0.5130     <.0001
              127        121        115        127         104

CAB         -0.01772   -0.16731   -0.18948   0.08980    -0.05980
EXPORTS      0.8068     0.0194     0.0080     0.2143     0.4441
              193        195        195        193         166

MONEY       -0.20486   0.31193    0.34337    0.00254     0.13002
GDP          0.0015     <.0001     <.0001     0.9688     0.0651
              239        246        240        239         202

ARREDSL      -0.143    0.33187    0.34576    -0.10347   -0.00604
             0.0163     <.0001     <.0001     0.0828     0.9303
              282        237        231        282         212

POLINDEX    -0.04152   -0.05179   -0.07938   -0.18937   -0.12291
             0.5143     0.4354     0.2377     0.0027     0.0708
              249        229        223        249         217

DEMOC       0.11089    0.14947    0.13133    0.12927    -0.06790
             0.0789     0.0228     0.0486     0.0403     0.3194
              252        232        226        252         217

DURABLE     -0.04082   0.06494    0.01331    -0.25217   -0.19509
             0.5066     0.3094     0.8372     <.0001     0.0035
              267        247        241        267         222

PERSIST     0.05786    -0.24578   -0.24415   -0.06586    0.05405
             0.3633     0.0002     0.0002     0.3006     0.4282
              249        229        223        249         217

             OFFEX    LENDIN       CAB        MONE       ARRE
             RATE     G RATE   EXPORT YGDP               DSL

IMFDEBT

DEBTGDP

GNPPERC

SERVDEBT

INFLATION

OFFEX       1.0000
RATE
              283

LENDING     0.1009    1.000
RATE        0.2608
              126      127

CAB         -0.076    -0.026     1.0000
EXPORTS     0.2888    0.798
              196      101         197

MONEY       -0.0378   -0.164     -0.0531     1.0000
GDP         0.5526    0.072      0.4598
              248      121         196         249

ARREDSL     0.1719    -0.008     0.0163      0.19848    1.0000
            0.0045    0.928      0.8237      0.0020
              272      127         189         239       293

POLINDEX    0.1406    -0.022     0.1255      0.18505   -0.07152
            0.0239    0.815      0.0836      0.0048     0.2608
              258      111         191         231       249

DEMOC       -0.153    -0.091     0.1189      0.46940   -0.09651
            0.0133    0.332      0.0985      <.0001     0.1265
              261      114         194         234       252

DURABLE     0.2531    0.078      0.0998      -0.0955   0.00717
            <.0001    0.382      0.1631      0.1331     0.9072
              276      127         197         249       267

PERSIST     -0.0357   -0.018     0.1866      0.03120   -0.16520
            0.5683    0.855      0.0097      0.6371     0.0090
              258      111         191         231       249

              POL      DEMOC     DURABLE   PERSIST
             INDEX

IMFDEBT

DEBTGDP

GNPPERC

SERVDEBT

INFLATION

OFFEX
RATE

LENDING
RATE

CAB
EXPORTS

MONEY
GDP

ARREDSL

POLINDEX    1.0000

              259

DEMOC       -0.2948    1.0000
            <.0001
              259       262

DURABLE     0.9411    -0.36050   1.0000
            <.0001     <.0001
              259       262        277

PERSIST     0.7517    -0.21685   0.4916    1.0000
            <.0001     0.0004    <.0001
              259       259        259       259

TABLE 5--OLS REGRESSION RESULTS IMFDEBT AS A DEPENDENT VARIABLE

                 Model 1          Model 2         Model 3

DEBTGDP       -0.2246164 ***   -0.1171468 **   -0.1264057 **
              (4.42)           (2.13)          (2.07)
GNPPERC       0.0021387 ***    0.0012 ***      0.0012023 **
              (5.03)           (2.63)          (2.36)
SERVDEBT      0.1925709 ***    0.0553013       -0.0889401
              (3.32)           (1)             (1.56)
INFLATION     -0.0009609 **    -0.0003387      -0.0010885 **
              (2.13)           (0.67)          (2.03)
OFFEXRATE     -0.0081714 *     -0.007421       -0.00822
              (1.78)           (1.39)          (1.37)
LENDINGRATE   0.0033604        -0.0154249      -0.0045306
              (0.22)           (0.89)          (0.23)
CABEXPORTS    -0.0088253       -0.0058951      0.0012024
              (0.85)           (0.48)          (0.09)
MONEYGDP      -0.0006417 ***   -0.000833 ***   -0.0002802 **
              (4.28)           (7.05)          (2.22)
ARREDSL       -0.1150126 ***   -0.0519761 *    -0.0952377 ***
              (4.06)           (1.76)          (2.98)
POLINDEX

DEMOC         0.0176043 ***    0.0309323 ***
              (2.67)           (8.34)
DURABLE       -0.0012519 ***                   -0.0011715 ***
              (3.56)                           (6.46)
PERSIST       0.0027973 ***
              (5.47)
CONSTANT      0.0480559        0.0597808       0.0939513
              (4.1)            (5.61)          (7.72)

[R.sup.2]     0.7726           0.6779          0.6004
N             85               85              85

                 Model 4          Model 5

DEBTGDP       -0.1191255       -0.1003199
              (1.5)            (1.47)
GNPPERC       0.0013147 *      0.0010106 *
              (1.96)           (1.77)
SERVDEBT      -0.1357458 *     -0.1515164 **
              (1.7)            (2.4)
INFLATION     -0.0019416 ***   -0.0012579 **
              (2.89)           (2.11)
OFFEXRATE     -0.0028193       -0.0067341
              (0.38)           (1.02)
LENDINGRATE   -0.0248729       -0.0129068
              (1.03)           (0.6)
CABEXPORTS    0.0055782        0.0039203
              (0.33)           (0.26)
MONEYGDP      -0.0004585 ***   -0.0003029 **
              (2.92)           (2.15)
ARREDSL       -0.1099632 ***   -0.0896123 **
              (2.66)           (2.51)
POLINDEX                       -0.0007169 ***
                               (4.51)
DEMOC

DURABLE

PERSIST       -0.0002197
              (0.38)
CONSTANT      0.0762962        0.096375
              (4.55)           (6.89)

[R.sup.2]     0.3762           0.5099
N             85               85

*, ** and ***: statistically significant at 10%, 5%, and 1%,
respectively.

TABLE 6--REGRESSION RESULTS FOR IMFDUMMY AS A DEPENDENT VARIABLE.

                 Model 1         Model 2         Model 3

DEBTGDP       0.4778833       1.185856        1.107646
              (0.58)          (1.53)          (1.4)
GNPPERC       0.0023542       -0.0035764      -0.0036768
              (0.34)          (0.56)          (0.56)
SERVDEBT      0.0531525       -0.5987511      -1.805608 **
              (0.06)          (0.77)          (2.45)
INFLATION     0.0226402 ***   0.0273949 ***   0.0215815 ***
              (3.09)          (3.84)          (3.1)
OFFEXRATE     0.0747608       0.0844563       0.0742047
              (1.01)          (1.12)          (0.96)
LENDINGRATE   -0.2127366      -0.3652278      -0.2601815
              (0.85)          (1.49)          (1.02)
CABEXPORTS    -0.1435947      -0.134622       -0.0767655
              (0.85)          (0.78)          (0.44)
MONEYGDP      -0.0040418      -0.006359 ***   -0.00154
              (1.66)          (3.82)          (0.94)
ARREDSL       -0.9454965 **   -0.4754455      -0.8317015 **
              (2.06)          (1.14)          (2.01)
POLINDEX

DEMOC         0.1231064       0.2631064 ***
              (1.15)          (5.03)
DURABLE       -0.0108334 *                    -0.0106812 ***
              (1.9)                           (4.54)
PERSIST       0.01802 **
              (2.18)
CONSTANT      0.3684283       0.3714212       0.6747719
              (1.94)          (2.47)          (4.28)

[R.sup.2]     0.6746          0.6513          0.6339
N             85              85              85

                 Model 4         Model 5

DEBTGDP       1.346476        1.363282
              (1.45)          (1.64)
GNPPERC       -0.0044135      -0.0056808
              (0.56)          (0.82)
SERVDEBT      -2.528219 ***   -2.395794 ***
              (2.72)          (3.11)
INFLATION     0.0152747 *     0.0205346 ***
              (1.95)          (2.82)
OFFEXRATE     0.118143        0.0850027
              (1.36)          (1.05)
LENDINGRATE   -0.447598       -0.3287135
              (1.59)          (1.25)
CABEXPORTS    -0.0312909      -0.052905
              (0.16)          (0.29)
MONEYGDP      -0.0028852      -0.0016348
              (1.58)          (0.95)
ARREDSL       -0.8721078 *    -0.7640472 *
              (1.81)          (1.76)
POLINDEX                      -0.0070096 ***
                              (3.61)
DEMOC

DURABLE

PERSIST       -0.0066394
              (0.99)
CONSTANT      0.5795991       0.7121784
              (2.96)          (4.17)

[R.sup.2]     0.538           0.6021
N             85              85

*, ** and ***: statistically significant at 10%, 5%, and 1%
respectively.

Figure 4 -IMF Fund Allocation--MENA Region Recipients--1970-2007
(Source: WDI)

Tunisia     6.51%
Yemen       8.25%
Morocco    24.40%
Lebanon     0.16%
Jordan     10.66%
Egypt      10.25%
Djibouti    0.34%
Algeria    39.43%

Note: Table made from pie chart.
Gale Copyright:
Copyright 2010 Gale, Cengage Learning. All rights reserved.