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IMF programs and stigma in Emerging Market Economies

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  • Claudia Maurini

    (Bank of Italy)

Abstract

This paper investigates the existence and estimates the magnitude of a financial market stigma associated with the International Monetary Fund’s non-concessional programmes. In particular, it focuses on the impact of IMF non-concessional loans on Emerging Markets’ sovereign spreads, using the propensity score matching methodology to deal with the selection bias problem. We find evidence of higher spreads for countries supported by a non-concessional IMF programme with respect to comparable countries that are not supported by such a programme. This effect may be linked to both a pure financial stigma and the (low) probability of the programme succeeding, as it tends to dissipate towards the end of the programme and to be smaller and less significant if we restrict the sample to non-repeated programmes (more likely to be successful). Finally, we find that precautionary programmes (such as the Flexible Credit Line) have a negative impact on sovereign spreads.

Suggested Citation

  • Claudia Maurini, 2019. "IMF programs and stigma in Emerging Market Economies," Temi di discussione (Economic working papers) 1247, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1247_19
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    References listed on IDEAS

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    More about this item

    Keywords

    International Monetary Fund; propensity score matching; sovereign spreads; emerging market economies;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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