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Sudden Stops and IMF-Supported Programs

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Author Info
Ashoka Mody
Poonam Gupta
Barry J. Eichengreen

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Abstract

Could a high-access, quick-disbursing "insurance facility" in the IMF help to reduce the incidence of sharp interruptions in capital flows ("sudden stops")? We contribute to the debate around this question by analyzing the impact of conventional IMF-supported programs on the incidence of sudden stops. Correcting for the non-random assignment of programs, we find that sudden stops are fewer and generally less severe when an IMF arrangement exists and that this form of "insurance" works best for countries with strong fundamentals. In contrast there is no evidence that a Fund-supported program attenuates the output effects of capital account reversals if these nonetheless occur.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/101.

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Length: 53 pages
Date of creation: 28 Apr 2006
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Handle: RePEc:imf:imfwpa:06/101

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Related research
Keywords: Sudden stops ; insurance ; IMF - supported programs ; Fund-supported adjustment programs ; Insurance ; Capital flows ; Capital account ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Milesi-Ferretti, Gian Maria & Razin, Assaf, 1998. "Current Account Reversals and Currency Crises: Empirical Regularities," CEPR Discussion Papers 1921, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Sebastian Edwards, 2005. "Capital Controls, Sudden Stops and Current Account Reversals," NBER Working Papers 11170, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Eduardo Levy Yeyati & Tito Cordella, 2004. "Country Insurance," Econometric Society 2004 Latin American Meetings 136, Econometric Society.
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  4. Tito Cordella & Eduardo Levy Yeyati, 2005. "A (New) Country Insurance Facility," IMF Working Papers 05/23, International Monetary Fund. [Downloadable!]
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  5. Mody, Ashoka & Taylor, Mark P, 2003. "Common Vulnerabilities," CEPR Discussion Papers 3759, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Michael Hutchison, 2001. "A cure worse than the disease? currency crises and the output costs of IMF-supported stabilization programs," Pacific Basin Working Paper Series 01-02, Federal Reserve Bank of San Francisco. [Downloadable!]
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  7. Timothy D. Lane & Steven Phillips, 2000. "Does IMF Financing Result in Moral Hazard?," IMF Working Papers 00/168, International Monetary Fund.
  8. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany. [Downloadable!]
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  9. Przeworski, Adam & Vreeland, James Raymond, 2000. "The effect of IMF programs on economic growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 385-421, August. [Downloadable!] (restricted)
  10. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November. [Downloadable!] (restricted)
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  11. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Eichengreen, Barry & Mody, Ashoka, 1998. "Interest Rates in the North and Capital Flows to the South: Is There a Missing Link?," International Finance, Blackwell Publishing, vol. 1(1), pages 35-57, October. [Downloadable!] (restricted)
  13. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany. [Downloadable!]
  14. repec:rus:hseeco:181565 is not listed on IDEAS
  15. Ilhyock Shim & Ralph Chami & Sunil Sharma, 2004. "A Model of the IMF as a Coinsurance Arrangement," IMF Working Papers 04/219, International Monetary Fund.
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  16. Ashoka Mody & Diego Saravia, 2005. "Catalyzing Private Capital Flows: Do IMF Programs Work as Commitment Devices?," Documentos de Trabajo 280, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  17. 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. [Downloadable!] (restricted)
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  18. Frankel, Jeffrey & Cavallo, Eduardo, 2004. "Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, or Less? Using Gravity to Establish Causality," Working Paper Series rwp04-038, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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  19. Pastor, Manuel Jr., 1987. "The effects of IMF programs in the Third World: Debate and evidence from Latin America," World Development, Elsevier, vol. 15(2), pages 249-262, February. [Downloadable!] (restricted)
  20. Guillermo Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco, issue Jun. [Downloadable!]
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  21. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany. [Downloadable!]
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  22. Jonathan David Ostry & Jeromin Zettelmeyer, 2005. "Strengthening IMF Crisis Prevention," IMF Working Papers 05/206, International Monetary Fund. [Downloadable!]
  23. Ashoka Mody & Barry J. Eichengreen & Kenneth Kletzer, 2005. "The IMF in a World of Private Capital Markets," IMF Working Papers 05/84, International Monetary Fund. [Downloadable!]
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  24. Jeffrey A. Frankel & David C. Parsley & Shang-Jin Wei, 2005. "Slow Passthrough Around the World: A New Import for Developing Countries?," NBER Working Papers 11199, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  25. Marchesi, Silvia, 1999. "Adoption of an IMF Programme and Debt Rescheduling. An Empirical Analysis," The Warwick Economics Research Paper Series (TWERPS) 542, University of Warwick, Department of Economics. [Downloadable!]
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  26. Axel Dreher, 2004. "IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality," International Finance 0404004, EconWPA, revised 25 Apr 2004. [Downloadable!]
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  27. Mody, Ashoka & Murshid, Antu Panini, 2005. "Growing up with capital flows," Journal of International Economics, Elsevier, vol. 65(1), pages 249-266, January. [Downloadable!] (restricted)
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  28. Deepak Mishra & Poonam Gupta & Ratna Sahay, 2003. "Output Response to Currency Crises," IMF Working Papers 03/230, International Monetary Fund.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rose, Andrew K, 2006. "A Stable International Monetary System Emerges: Bretton Woods, Reversed," CEPR Discussion Papers 5854, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. David Hofman & Ruben Atoyan & Dimitri Tzanninis & Mauro Mecagni, 2007. "The Duration of Capital Account Crises--An Empirical Analysis," IMF Working Papers 07/258, International Monetary Fund. [Downloadable!]
  3. Sebastian Edwards, 2008. "Sequencing of Reforms, Financial Globalization, and Macroeconomic Vulnerability," NBER Working Papers 14384, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Emine Boz, 2009. "Sovereign Default, Private Sector Creditors and the IFIs," IMF Working Papers 09/46, International Monetary Fund. [Downloadable!]
  5. Andrew K. Rose, 2006. "A Stable International Monetary System Emerges: Inflation Targeting is Bretton Woods, Reversed," NBER Working Papers 12711, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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