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Vulnerability, Crisis and Debt Maturity: do IMF Interventions Shorten the Length of Borrowing?

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  • Diego Saravia

Abstract

This paper studies how IMF lending affects countries' bonds maturity. Debt maturity was claimed to be one of the causes of the crisis of recent years: Too much short-term debt would be the seed of self-fulfilling crises. In turn, one of the goals of the IMF is to prevent crises and to alleviate their effects once they occur. I find that IMF interventions shorten the length of countries' borrowing which is a non desirable, and not analyzed, consequence of IMF lending. Moreover, this finding is consistent with the implications of this Institution's senior status in its lending.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 600.

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Date of creation: Nov 2010
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Handle: RePEc:chb:bcchwp:600

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  1. Barry Eichengreen & Ashoka Mody, 2004. "Do Collective Action Clauses Raise Borrowing Costs?," Economic Journal, Royal Economic Society, vol. 114(495), pages 247-264, 04.
  2. 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, 07.
  3. Diego Saravia, 2004. "On the Role and E ects of IMF Seniority," Econometric Society 2004 Latin American Meetings 131, Econometric Society.
  4. Ran Bi, 2006. "Debt Dilution and Maturity Structure of Sovereign Bonds," 2006 Meeting Papers 652, Society for Economic Dynamics.
  5. Barry Eichengreen, 2003. "Restructuring Sovereign Debt," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 75-98, Fall.
  6. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  7. Barry Eichengreen & Poonam Gupta & Ashoka Mody, 2006. "Sudden Stops and IMF-Supported Programs," NBER Working Papers 12235, National Bureau of Economic Research, Inc.
  8. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
  9. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
  10. Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc.
  11. Leung, Siu Fai & Yu, Shihti, 1996. "On the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 197-229.
  12. Diamond, Douglas W., 1993. "Seniority and maturity of debt contracts," Journal of Financial Economics, Elsevier, vol. 33(3), pages 341-368, June.
  13. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 1999. "Institutions, financial markets, and firm debt maturity," Journal of Financial Economics, Elsevier, vol. 54(3), pages 295-336, December.
  14. Deesomsak, Rataporn & Paudyal, Krishna & Pescetto, Gioia, 2009. "Debt maturity structure and the 1997 Asian financial crisis," Journal of Multinational Financial Management, Elsevier, vol. 19(1), pages 26-42, February.
  15. Axel Dreher & Silvia Marchesi & James Vreeland, 2008. "The political economy of IMF forecasts," Public Choice, Springer, vol. 137(1), pages 145-171, October.
  16. Graham Bird & Dane Rowlands, 2001. "IMF lending: how is it affected by economic, political and institutional factors?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 4(3), pages 243-270.
  17. Wasseem Mina & Jorge Martinez-Vazquez, 2002. "IMF Lending, Maturity of International Debt and Moral Hazard," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0301, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  18. Marchesi, Silvia & Thomas, Jonathan P, 1999. "IMF Conditionality as a Screening Device," Economic Journal, Royal Economic Society, vol. 109(454), pages C111-25, March.
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Cited by:
  1. Luca Papi Author-Name-First Luca & Andrea F. Presbitero & Alberto Zazzaro, 2013. "IMF Lending and Banking Crises," Working Papers CASMEF 1304, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  2. Aitor Erce, 2012. "Does the IMF´s official support affect sovereign bond maturities?," Banco de Espa�a Working Papers 1231, Banco de Espa�a.
  3. Aitor Erce, 2012. "Does the IMF's official support affect sovereign bonds maturities?," Globalization and Monetary Policy Institute Working Paper 128, Federal Reserve Bank of Dallas.

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