IMF-Supported Programs: Stimulating Capital to Solvent Countries
AbstractSovereign default is the switching state between successful and unsuccessful Fund catalysis. We find the IMF to be effective in mobilising private capital flows to middle-income countries that participate in a Fund program, but do not restructure their debt. A debt restructuring is a clear signal of very weak economic fundamentals, deterring creditors from resuming lending, even when the IMF intervenes. As long as default is avoided, IMF programs help a country signal its willingness to reform and repay debts, thereby catalysing private capital. This signalling role appears to be more important for Fund catalysis, than the size of IMF lending.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 244.
Date of creation: Mar 2010
Date of revision:
IMF; Sovereign default; Private capital flows; Catalytic effect;
Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-02 (All new papers)
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- Markus Jorra, 2010.
"The Effect of IMF Lending on the Probability of Sovereign Debt Crises,"
MAGKS Papers on Economics
201026, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Jorra, Markus, 2012. "The effect of IMF lending on the probability of sovereign debt crises," Journal of International Money and Finance, Elsevier, vol. 31(4), pages 709-725.
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