The combination of an exchange rate shock and IMF conditionality can cause rapid economic growth in developing countries.

Question

Quizplus · Accepted Answer

While an exchange rate shock can sometimes stimulate exports by making them cheaper on the international market, the combination of such a shock and IMF conditionality often leads to austerity measures that can suppress domestic demand and slow economic growth in the short to medium term. Rapid economic growth is not a guaranteed outcome and depends on various factors including the country's economic structure, the nature of the IMF conditions, and global economic conditions.

The Combination of an Exchange Rate Shock and IMF Conditionality