The Institutional Influence on a Developing Country?s Economy: a Case of Cape Verde

The IMF has been playing a leading role in poverty reduction activities. Its Poverty Reduction and Growth Facility (PRGF) grogram provides resources to low-income countries aiming to foster durable growth, thereby raising living standards and reducing poverty. Many developing countries have participated in the program. But the results are not always good. Some countries experienced painful times with low growth gate and even depression. Much debate has been made over the effects of IMF- supported stability-oriented programs. A proper standard for measuring the effectiveness is to compare the macroeconomic outcomes under the program with the outcomes that would have emerged in the absence of the program. The difficulty lies in that it is not possible to have both of the outcomes because in reality, we can only have one experience. In this study, we use a system dynamics national model as a base and test its long-term behavior with and without IMF?s poverty reduction program. Base on the simulation result, we can compare the two outcomes, thus, study the long-term effect of IMF's poverty reduction program.