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Country Insurance

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  • Tito Cordella

    (International Monetary Fund)

  • Eduardo Levy Yeyati

    (International Monetary Fund)

Abstract

In this paper, we examine how country insurance schemes affect policymakers' incentives to undertake reforms. Such schemes (especially when made contingent on negative external shocks) are more likely to foster than to delay reform in crisis-prone volatile economies. The consequences of country insurance, however, hinge on the nature of the reforms being considered: "buffering" reforms, aimed at mitigating the cost of crises, could be partially substituted for, and ultimately discouraged by, insurance. By contrast, "enhancing" reforms that pay more generously in the absence of a crisis are likely to be promoted. Copyright 2005, International Monetary Fund

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 52 (2005)
Issue (Month): si ()
Pages: 6

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Handle: RePEc:pal:imfstp:v:52:y:2005:i:si:p:6

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  1. Sachs, Jeffrey & Tornell, Aaron & Velasco, Andres, 1996. "The Mexican peso crisis: Sudden death or death foretold?," Journal of International Economics, Elsevier, vol. 41(3-4), pages 265-283, November.
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  11. Roberto Chang & Andr├ęs Velasco, 2001. "A Model Of Financial Crises In Emerging Markets," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 489-517, May.
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