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Catalyzing Private Capital Flows: Do IMF Programs Work as Commitment Devices?

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Author Info
Ashoka Mody
Diego Saravia () (Instituto de Economía. Pontificia Universidad Católica de Chile.)

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Abstract

An objective of IMF programs is to help countries improve their access to international capital markets. In this paper, we examine if Fund programs influence the ability of developing country issuers to tap international bond markets and whether they improve spreads paid on the bonds issued. We find that Fund programs do not provide a uniformly favorable signaling effect, i.e., the mere presence of the IMF does not act as a strong seal of good housekeeping. Instead, the evidence is most consistent with a positive effect of IMF programs when they are viewed as likely to lead to policy reform and when undertaken before economic fundamentals have deteriorated significantly. The size of the Fund’s program matters, but the credibility of a joint commitment by the country and the IMF appears to be critical.

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Paper provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 280.

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Date of creation: 2005
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Publication status: Published as "Catalyzing Capital Flows: Do IMF-Supported Programs Work as Commitment Devices?", The Economic Journal, Nº 116, pp. 1-26, julio 2006.
Handle: RePEc:ioe:doctra:280

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Related research
Keywords: Programs; signaling; capital market access;

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Find related papers by JEL classification:
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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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.:

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  4. Graham Bird & Dane Rowlands, 2001. "Catalysis or Direct Borrowing: The Role of the IMF in Mobilising Private Capital," The World Economy, Blackwell Publishing, vol. 24(1), pages 81-98, 01. [Downloadable!] (restricted)
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  7. Diego Saravia, 2007. "On the Role and Effects of IMF Seniority," Documentos de Trabajo 317, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
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  16. Isabel Schnabel & Giovanni Dell'Ariccia & Jeromin Zettelmeyer, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund. [Downloadable!]
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    Other versions:
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  1. R. Gaston Gelos, Ratna Sahay and Guido Sandleris, 2008. "Sovereign Borrowing by Developing Countries: What Determines Market Access?," Business School Working Papers 2008-02, Universidad Torcuato Di Tella. [Downloadable!]
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  2. Jong-Wha Lee & Kwanho Shin, 2005. "IMF Bailouts and Moral Hazard," International Finance 0501005, EconWPA. [Downloadable!]
    Other versions:
  3. Miguel Fuentes & Diego Saravia, 2006. "Sovereign Defaulters: Do International Capital Markets Punish Them?," Documentos de Trabajo 314, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
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  4. Juan Zalduendo & Uma Ramakrishnan, 2006. "The Role of IMF Support in Crisis Prevention," IMF Working Papers 06/75, International Monetary Fund. [Downloadable!]
  5. Paolo Manasse & Axel Schimmelpfennig & Nouriel Roubini, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund. [Downloadable!]
  6. Roberto Benelli, 2003. "Do IMF-Supported Programs Boost Private Capital Inflows? The Role of Program Size and Policy Adjustment," IMF Working Papers 03/231, International Monetary Fund. [Downloadable!]
  7. Barry Eichengreen & Poonam Gupta & Ashoka Mody, 2006. "Sudden Stops and IMF-Supported Programs," NBER Working Papers 12235, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Paolo Manasse & Nouriel Roubini, 2005. "'Rules of Thumb' for Sovereign Debt Crises," International Finance 0509003, EconWPA. [Downloadable!]
    Other versions:
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