The Role of IMF Support in Crisis Prevention
AbstractThis paper examines the role of IMF-supported programs in crisis prevention; specifically, whether, conditional on an episode of intense market pressures, IMF financial support helps prevent a capital account crisis from developing and, if so, through what channels. In doing so, the paper distinguishes between the seal of approval inherent in IMF support and its financing, evaluates the interaction of IMF support with economic policies, and assesses whether IMF financing has a different impact on the likelihood of a crisis than other forms of liquidity. The main result is that IMF financing helps prevent crises through the liquidity provided (i.e., money matters). However, since the effect holds even after controlling for (gross) foreign exchange reserves, stronger policies and the seal of approval under an IMFsupported program must also play a role. Finally, the results suggest that IMF financing as a crisis prevention tool is most effective for an intermediate range of economic fundamentals.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 06/75.
Date of creation: 01 Mar 2006
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-05 (All new papers)
- NEP-FDG-2006-08-05 (Financial Development & Growth)
- NEP-FMK-2006-08-05 (Financial Markets)
- NEP-IFN-2006-08-05 (International Finance)
- NEP-SEA-2006-08-05 (South East Asia)
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.:
- Stephen Morris & Hyun Song Shin, 2003.
"Catalytic Finance: When Does It Work?,"
Cowles Foundation Discussion Papers
1400, Cowles Foundation for Research in Economics, Yale University.
- Barry Eichengreen & Kenneth Kletzer & Ashoka Mody, 2005.
"The IMF in a World of Private Capital Markets,"
NBER Working Papers
11198, National Bureau of Economic Research, Inc.
- Eichengreen, Barry & Kletzer, Kenneth & Mody, Ashoka, 2005. "The IMF in a World of Private Capital Markets," Santa Cruz Department of Economics, Working Paper Series qt84s7r0jf, Department of Economics, UC Santa Cruz.
- Barry Eichengreen, 2005. "The IMF in a World of Private Capital Markets," Working Papers id:48, eSocialSciences.
- 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.
- Barry Eichengreen & Kenneth Kletzer & Ashoka Mody, 2005. "The IMF in a world of private capital markets," Working Paper Series 2005-12, Federal Reserve Bank of San Francisco.
- Michael D. Bordo & Ashoka Mody & Nienke Oomes, 2004. "Keeping Capital Flowing," IMF Working Papers 04/197, International Monetary Fund.
- Michael D. Bordo & Ashoka Mody & Nienke Oomes, 2004.
"Keeping Capital Flowing: The Role of the IMF,"
Wiley Blackwell, vol. 7(3), pages 421-450, December.
- Graciela L. Kaminsky & Carmen M. Reinhart, 1996.
"The twin crises: the causes of banking and balance-of-payments problems,"
International Finance Discussion Papers
544, Board of Governors of the Federal Reserve System (U.S.).
- Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
- 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.
- Curzio Giannini & Carlo Cottarelli, 2002. "Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending," IMF Working Papers 02/193, International Monetary Fund.
- Giancarlo Corsetti & Bernardo Guimaraes & Nouriel Roubini, 2003.
"International Lending of Last Resort and Moral Hazard: A Model of IMF's Catalytic Finance,"
NBER Working Papers
10125, National Bureau of Economic Research, Inc.
- Corsetti, Giancarlo & Guimaraes, Bernardo & Roubini, Nouriel, 2006. "International lending of last resort and moral hazard: A model of IMF's catalytic finance," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 441-471, April.
- Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
- Ashoka Mody & Diego Saravia, 2005. "Catalyzing Private Capital Flows: Do IMF Programs Work as Commitment Devices?," Documentos de Trabajo 280, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Graham Bird & Dane Rowlands, 2002. "Do IMF Programmes Have a Catalytic Effect on Other International Capital Flows?," Oxford Development Studies, Taylor & Francis Journals, vol. 30(3), pages 229-249.
- Jun Il Kim, 2006. "IMF-Supported Programs and Crisis Prevention," IMF Working Papers 06/156, International Monetary Fund.
- Stephan Danninger & Irina Tytell & Ravi Balakrishnan & Selim Elekdag, 2009. "The Transmission of Financial Stress From Advanced to Emerging Economies," IMF Working Papers 09/133, International Monetary Fund.
- Jun Il Kim, 2007. "Unconditional IMF Financial Support and Investor Moral Hazard," IMF Working Papers 07/104, International Monetary Fund.
- Jesus Gonzalez-Garcia & John Cady, 2006. "The IMF's Reserves Template and Nominal Exchange Rate Volatility," IMF Working Papers 06/274, International Monetary Fund.
- Pradeep Mitra & Marcelo Selowsky & Juan Zalduendo, 2010. "Turmoil at Twenty : Recession, Recovery, and Reform in Central and Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 2682, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.