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International financial rescues and debtor-country moral hazard

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  • Prasanna Gai
  • Ashley Taylor

Abstract

In this paper the question of whether recent international policy initiatives to facilitate financial rescues in emerging market countries have influenced debtors' incentives to access official sector resources is examined. A country's systemic importance is highlighted as a key characteristic that drives access to official sector finance. The effect of these policy initiatives on IMF programme participation is estimated using a pooled probit model. The safety net implied by policy changes to permit exceptional access is shown to have a greater marginal impact on the use of official sector resources, the more systemically important the debtor country is. The paper's results can be interpreted as offering some support for the presence of debtor-country moral hazard.

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File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2004/WP217.pdf
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Paper provided by Bank of England in its series Bank of England working papers with number 217.

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Date of creation: May 2004
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Handle: RePEc:boe:boeewp:217
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Find related papers by JEL classification:
  • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
  • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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  1. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Centre de Recherche en Economie et Statistique.
  2. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
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  4. Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1245-1269, October.
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  7. Andy Haldane & Mark Kruger, 2001. "The Resolution of International Financial Crises: Private Finance and Public Funds," Staff Working Papers 01-20, Bank of Canada.
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  10. Knight, Malcolm & Santaella, Julio A., 1997. "Economic determinants of IMF financial arrangements," Journal of Development Economics, Elsevier, vol. 54(2), pages 405-436, December.
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  13. Andrew G Haldane & Jorg Scheibe, 2004. "IMF lending and creditor moral hazard," Bank of England working papers 216, Bank of England.
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Cited by:

  1. Jong-Wha Lee & Kwanho Shin, 2005. "IMF Bailouts and Moral Hazard," International Finance 0501005, EconWPA.
  2. Gregor Irwin & David Vines, 2004. "The efficient resolution of capital account crises: how to avoid moral hazard," Bank of England working papers 233, Bank of England.
  3. Axel Dreher, 2009. "IMF conditionality: theory and evidence," Public Choice, Springer, vol. 141(1), pages 233-267, October.
  4. Axel Dreher, 2004. "Does the IMF cause moral hazard? A critical review of the evidence," International Finance 0402003, EconWPA, revised 29 Mar 2004.
  5. Li, Larry & Sy, Malick & McMurray, Adela, 2015. "Insights into the IMF bailout debate: A review and research agenda," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 891-914.
  6. Andrew G Haldane & Jorg Scheibe, 2004. "IMF lending and creditor moral hazard," Bank of England working papers 216, Bank of England.
  7. Evrensel, Ayse Y. & Kim, Jong Sung, 2006. "Macroeconomic policies and participation in IMF programs," Economic Systems, Elsevier, vol. 30(3), pages 264-281, October.
  8. Philipp Maier, 2007. "Do We Need the IMF to Resolve a Crisis? Lessons from Past Episodes of Debt Restructuring," Staff Working Papers 07-10, Bank of Canada.
  9. Martin Brooke & Rhys R. Mendes & Alex Pienkowski & Eric Santor, 2013. "Sovereign Default and State-Contingent Debt," Discussion Papers 13-3, Bank of Canada.

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