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Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending


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  • Curzio Giannini
  • Carlo Cottarelli
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    During the 1990s, the concept of "catalytic official finance" (COF) gained prominence in policy debates. The concept revolves around the idea that the propensity of investors to lend to a country increases when the IMF provides its "seal of approval"-backed up by only limited official financing-on the country''s economic program. COF aims at avoiding, on the one hand, the massive use of public money to bail out private investors; on the other, the recourse to coercive bailing-in mechanisms. The paper concludes that COF, while possibly useful in other contexts, is less reliable when used to manage capital account crises.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/193.

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    Length: 50
    Date of creation: 01 Nov 2002
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    Handle: RePEc:imf:imfwpa:02/193

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    Postal: International Monetary Fund, Washington, DC USA
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    Keywords: International Monetary Fund; capital inflows; private capital inflows; private capital; current account; capital outflow; debt crisis; capital markets; capital account crises; debt restructuring; private capital flows; moral hazard; capital mobility; private investors; capital flows; capital movements; external debt; international capital markets; debt service; balance of payment; debt reduction; crisis prevention; private banks; international capital; sovereign debt restructuring; capital account convertibility; current account adjustment; sovereign debt; capital inflow; debt rescheduling; crisis countries; liquidity crises; capital account liberalization; debt relief; central banks; bond issues; net capital; private creditors; speculative attack; balance of payment crises; current account deficit; repayments; commercial bank loans; global capital markets; capital controls; private inflows; credit union; private flows; short-term debt; access to international capital markets; speculative attacks; capital outflows; access to international capital; international lending; balance of payments; external obligations; credit tranches; international bonds; external liabilities; commercial creditors; private capital inflow; balance of payment crisis; central bank; foreign loans; liquidity ? crises; private credit; capital accounts; amount of debt; official creditors; capital control; external finance; debtor country; debt problem; external debt service; domestic debt; foreign debts; current account surpluses; reserve bank; sovereign debtors; flows of capital; long-term debt; debt problems; debt restructuring operations; private finance; commercial bank loan; indebted countries; debt contracts; foreign debt;


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