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International Bailouts, Moral Hazard, and Conditionality

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  • Olivier Jeanne
  • Jeromin Zettelmeyer

Abstract

The large international bailouts of the 1990s have been criticized for differentreasons, in particular for generating moral hazard at the expense of theglobal taxpayer. We argue in this paper that some of these concerns areexaggerated or misleading because international bailouts have no or verylittle cost to the international community and the global taxpayer. Theproblem, in our view, is rather to ensure that the international safety net isnot used as an input into bad domestic policies. This may require a shifttowards ex ante conditionality, in the sense that the availability and size ofofficial crisis lending need to be conditional on government policies beforethe crisis.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 563.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_563

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  1. Simon Johnson & Peter Boone & Alasdair Breach & Eric Friedman, 1999. "Corporate Governance in the Asian Financial Crisis," William Davidson Institute Working Papers Series 297, William Davidson Institute at the University of Michigan.
  2. Shang-Jin Wei, 2000. "Local Corruption and Global Capital Flows," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(2), pages 303-354.
  3. Alberto Alesina & Geoffrey Carliner, 1991. "Politics and Economics in the Eighties," NBER Books, National Bureau of Economic Research, Inc, number ales91-1, May.
  4. Van Rijckeghem, Caroline & Weder, Beatrice, 1999. "Financial contagion: Spillovers through banking centers," CFS Working Paper Series 1999/17, Center for Financial Studies (CFS).
  5. Giovanni Dell'Ariccia & Jeromin Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund.
  6. Walter B. Wriston, 1998. "Dumb Networks and Smart Capital," Cato Journal, Cato Journal, Cato Institute, vol. 17(3), Winter.
  7. Michael Mussa, 1999. "Reforming the International Financial Architecture: Limiting Moral Hazard and Containing Real Hazard," RBA Annual Conference Volume, in: David Gruen & Luke Gower (ed.), Capital Flows and the International Financial System Reserve Bank of Australia.
  8. Thomas Romer & Barry R. Weingast, 1991. "Political Foundations of the Thrift Debacle," NBER Chapters, in: Politics and Economics in the Eighties, pages 175-214 National Bureau of Economic Research, Inc.
  9. Morris Goldstein, 2000. "Strengthening the International Financial Architecture: Where Do We Stand?," Working Paper Series WP00-8, Peterson Institute for International Economics.
  10. Lynn Aylward & Rupert Thorne, 1998. "An Econometric Analysis of Countries' Repayment Performance to the International Monetary Fund," IMF Working Papers 98/32, International Monetary Fund.
  11. Allan H. Meltzer, 1998. "Asian Problems and the IMF," Cato Journal, Cato Journal, Cato Institute, vol. 17(3), pages 264-274, Winter.
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