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IMF Lending and Banking Crises

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  • Luca Papi
  • Andrea F Presbitero
  • Alberto Zazzaro

Abstract

This paper looks at the effects of International Monetary Fund (IMF) lending programs on banking crises in a large sample of developing countries, over the period 1970–2010. The endogeneity of the IMF intervention is addressed by adopting an instrumental variable strategy and a propensity score matching estimator. Controlling for the standard determinants of banking crises, the results indicate that countries participating in IMF-supported lending programs are significantly less likely to experience a future banking crisis than nonborrowing countries. The paper also provides evidence suggesting that compliance with conditionality and loan size matter, corroborating the importance of IMF-supported reform and liquidity provision for banking sector stability.

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  • Luca Papi & Andrea F Presbitero & Alberto Zazzaro, 2015. "IMF Lending and Banking Crises," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(3), pages 644-691, November.
  • Handle: RePEc:pal:imfecr:v:63:y:2015:i:3:p:644-691
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    Cited by:

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    4. Fendel Ralf & Stremmel Hanno, 2016. "Characteristics of Banking Crises: A Comparative Study with Geographical Contagion," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(3), pages 349-388, May.
    5. Vesna Bucevska, 2015. "Currency Crises in EU Candidate Countries: An Early Warning System Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(4), pages 493-510, September.
    6. Seung M Choi & Laura E. Kodres & Jing Lu, 2018. "Friend or Foe? Cross-Border Linkages, Contagious Banking Crises, and “Coordinated” Macroprudential Policies," IMF Working Papers 18/9, International Monetary Fund.
    7. Beatrice D. Scheubel & Livio Stracca, 2016. "What Do We Know About the Global Financial Safety Net? A New Comprehensive Data Set," CESifo Working Paper Series 6184, CESifo Group Munich.
    8. repec:eee:jimfin:v:94:y:2019:i:c:p:160-182 is not listed on IDEAS
    9. Francesco Marchionne & Beniamino Pisicoli & Michele Fratianni, 2017. "Regulation, financial crises, and liberalization traps," Mo.Fi.R. Working Papers 143, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    10. Essers, Dennis & Ide, Stefaan, 2019. "The IMF and precautionary lending: An empirical evaluation of the selectivity and effectiveness of the Flexible Credit Line," Journal of International Money and Finance, Elsevier, vol. 92(C), pages 25-61.
    11. Scheubel, Beatrice & Herrala, Risto & Stracca, Livio, 2016. "What do we know about the global financial safety net? Data, rationale and possible evolution," Annual Conference 2016 (Augsburg): Demographic Change 145676, Verein für Socialpolitik / German Economic Association.
    12. De Haas, Ralph & Korniyenko, Yevgeniya & Pivovarsky, Alexander & Tsankova, Teodora, 2015. "Taming the herd? Foreign banks, the Vienna Initiative and crisis transmission," Journal of Financial Intermediation, Elsevier, vol. 24(3), pages 325-355.

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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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