Liquidity protection versus moral hazard: the role of the IMF
AbstractThis paper develops a simple game between the IMF a county and a set of atomistic private investors. The model is motivated by the case of Argentina. Under reasonable assumptions, the one shot game has no Nash equilibrium in pure strategies. Considering an equilibrium in mixed strategies, conditions are derived on whether the IMF should exist. A âcooperative first bestâ may be supported in a repeated game by a âminimum punishment strategyâ that may be optimal but may break down if the probability of insolvency rises. This implies that countries are likely to deviate in bad times placing the IMF in an âimpossible positionâ. It is suggested that the international financial architecture (IFA) remains incomplete.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 22 (2003)
Issue (Month): 7 (December)
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Web page: http://www.elsevier.com/locate/inca/30443
Other versions of this item:
- Andrew Powell y Leandro Arozamena, 2003. "Liquidity Protection versus Moral Hazard: The Role of the IMF," Business School Working Papers ocho, Universidad Torcuato Di Tella.
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