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Does the IMF Help or Hurt? The Effect of IMF Programs on the Likelihood and Outcome of Currency Crises

  • Dreher, Axel
  • Walter, Stefanie

Summary We empirically analyze the effect of International Monetary Fund (IMF) involvement on the risk of entering a currency crisis and, respectively, the outcome of such a crisis. Specifically, we investigate whether countries with previous IMF intervention are more likely to experience currency crises. In a second step, we analyze the IMF's impact on a country's decision to adjust the exchange rate, once a crisis occurs. We find that IMF involvement reduces the probability of a crisis. Once in a crisis, IMF programs significantly increase the probability that the authorities devalue the exchange rate. The amount of loans and compliance with conditionality have no impact.

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Article provided by Elsevier in its journal World Development.

Volume (Year): 38 (2010)
Issue (Month): 1 (January)
Pages: 1-18

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Handle: RePEc:eee:wdevel:v:38:y:2010:i:1:p:1-18
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

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