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Does the IMF´s official support affect sovereign bond maturities?

Author

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  • Aitor Erce

    (Banco de España)

Abstract

This paper looks at whether the tendency of some governments to borrow short term is reinforced by financial support from the International Monetary Fund. I first present a model of sovereign debt issuance at various maturities featuring endogenous liquidity crises and maturity mismatches due to financial underdevelopment. I use the model to analyse the impact of IMF lending during debt crises on the sovereign’s optimal maturity structure. Within the model, although IMF assistance is able to catalyse private flows, this provides incentives for government to issue larger amounts of short-term debt, making the roll-over problem larger. I take the model to the data and find support for the hypothesis that IMF lending leads countries to increase their short-term borrowing. Additionally, I do not find any positive effect of IMF lending on countries’ ability to tap international capital markets. These results helps explain why a catalytic effect of IMF lending has proved empirically elusive

Suggested Citation

  • Aitor Erce, 2012. "Does the IMF´s official support affect sovereign bond maturities?," Working Papers 1231, Banco de España.
    • Handle: RePEc:bde:wpaper:1231
    as

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    References listed on IDEAS

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    Cited by:

    1. Cheng, Gong, 2015. "The Global Financial Safety Net through the Prism of G20 Summits," MPRA Paper 68070, University Library of Munich, Germany, revised Nov 2015.

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    More about this item

    Keywords

    Sovereign debt; maturity; IMF; official support;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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