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Country Insurance

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  • Tito Cordella
  • Eduardo Levy Yeyati

Abstract

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. In this paper, we examine how the presence of country insurance schemes affects policymakers’ incentives to undertake reforms. Such schemes (especially when made contingent on negative external shocks) are more likely to foster than to delay reform in crisis-prone volatile economies. The consequences of country insurance, however, hinge on the nature of the reforms being considered: “buffering” reforms, aimed at mitigating the cost of crises, could be partially substituted for, and ultimately discouraged by, insurance. By contrast, “enhancing” reforms that pay off more generously in the absence of a crisis are likely to be promoted.

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File URL: http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-102004.pdf
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Bibliographic Info

Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number countryinsurance.

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Length: 27 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:udt:wpbsdt:countryinsurance

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  15. 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.
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