Liquidity protection versus moral hazard: the role of the IMF
This paper develops a simple game between the IMF a county and a set of atomistic private investors. The model is motivated by the case of Argentina. Under reasonable assumptions, the one shot game has no Nash equilibrium in pure strategies. Considering an equilibrium in mixed strategies, conditions are derived on whether the IMF should exist. A “cooperative first best” may be supported in a repeated game by a “minimum punishment strategy” that may be optimal but may break down if the probability of insolvency rises. This implies that countries are likely to deviate in bad times placing the IMF in an “impossible position”. It is suggested that the international financial architecture (IFA) remains incomplete.
(This abstract was borrowed from another version of this item.)
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
- Bolton, Patrick & Scharfstein, David S, 1996. "Optimal Debt Structure and the Number of Creditors," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 1-25, February.
- Edward J Green & Robert H Porter, 1997.
"Noncooperative Collusion Under Imperfect Price Information,"
Levine's Working Paper Archive
1147, David K. Levine.
- Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
- Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
- Sayantan Ghosal & Marcus Miller, 2003.
"Co-ordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures,"
Royal Economic Society, vol. 113(487), pages 276-304, 04.
- Ghosal, Sayantan & Miller, Marcus, 2003. "Coordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures," CEPR Discussion Papers 3729, C.E.P.R. Discussion Papers.
- Morris, Stephen & Shin, Hyun Song, 2006.
"Catalytic finance: When does it work?,"
Journal of International Economics,
Elsevier, vol. 70(1), pages 161-177, September.
- 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.
- Stephen Morris & Hyun Song Shin, 2004. "Catalytic Finance: When Does It Work?," Yale School of Management Working Papers ysm339, Yale School of Management.
- Andy Haldane & Mark Kruger, 2001.
"The Resolution of International Financial Crises: Private Finance and Public Funds,"
Staff Working Papers
01-20, Bank of Canada.
- Andy Haldane, Bank of England & Mark Kruger, Bank of Canada, 2002. "The Resolution of International Financial Crises: Private Finance and Public Funds," Bank of Canada Review, Bank of Canada, vol. 2001(Winter), pages 3-13.
- Michael P. Dooley & Sujata Verma, 2001.
"Rescue Packages and Output Losses Following Crises,"
NBER Working Papers
8315, National Bureau of Economic Research, Inc.
- Michael P. Dooley & Sujata Verma, 2003. "Rescue Packages and Output Losses Following Crises," NBER Chapters, in: Managing Currency Crises in Emerging Markets, pages 125-186 National Bureau of Economic Research, Inc.
- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
- Eichengreen, Barry & Ruhl, Christof, 2001.
"The bail-in problem: systematic goals, ad hoc means,"
Elsevier, vol. 25(1), pages 3-32, March.
- Eichengreen, Barry & Ruehl, Christoph, 2000. "The Bail-In Problem: Systematic Goals, Ad Hoc Means," CEPR Discussion Papers 2427, C.E.P.R. Discussion Papers.
- Barry Eichengreen & Christof Ruehl, 2000. "The Bail-In Problem: Systematic Goals, Ad Hoc Means," NBER Working Papers 7653, National Bureau of Economic Research, Inc.
- Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, March.
When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:22:y:2003:i:7:p:1041-1063. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.