Catalyzing Private Capital Flows: Do IMF Programs Work as Commitment Devices?
AbstractAn 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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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 280.
Date of creation: 2005
Date of revision:
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.
Programs; signaling; capital market access;
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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