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Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices?

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  • Ashoka Mody
  • Diego Saravia

Abstract

In this article, we examine whether IMF programmes influence the ability of developing country issuers to tap international bond markets and if they improve spreads paid on the bonds issued. We find that Fund programmes do not provide a uniformly favourable signalling effect. Instead, the evidence is most consistent with a positive effect of IMF programmes when they are viewed as likely to lead to policy reform and when undertaken before economic fundamentals have deteriorated significantly. The size of the Fund's programme matters but the credibility of a joint commitment by the country and the IMF appears to be critical. Copyright 2006 International Monetary Fund. Journal compilation Royal Economic Society 2006.

Suggested Citation

  • Ashoka Mody & Diego Saravia, 2006. "Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices?," Economic Journal, Royal Economic Society, vol. 116(513), pages 843-867, July.
    • Handle: RePEc:ecj:econjl:v:116:y:2006:i:513:p:843-867
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