Abstract
IMF programmes have sought to balance economic adjustment and external financing in part by relying on catalysing capital inflows from other sources. This paper reviews the mechanisms by which catalysis is believed to operate, and the evidence pertaining to its existence. The conclusion is that traditional catalysis is generally less reliable than it has been portrayed to be. The policy implications of this elusive catalytic effect are examined. The more formal differentiation of programmes on the basis of recipients and their circumstances may help constrain some of the excessive claims made for catalysis and identify ways of providing a level of financing consistent with optimal adjustment. Comparative Economic Studies (2004) 46, 468–486. doi:10.1057/palgrave.ces.8100058