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Vulnerability, Crisis and Debt Maturity: Do IMF Interventions Shorten the Length of Borrowing?

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  • Diego Saravia

Abstract

This paper studies how IMF lending affects countries’ bonds maturity. Debt maturity was claimed to be one of the causes of the crisis of recent years: Too much short-term debt would be the seed of self-fulfilling crisis. In turn, one of the goals of the IMF interventions is to prevent crises and to alleviate their effects once they occur. I find evidence that, on average, IMF interventions reduce countries’ debt maturity which would be a non-desirable effect. However, I also find evidence that the final effect depends on countries’ fundamentals. The IMF would make countries borrow at longer terms (or reduce less the maturity) when the fundamentals are relatively weak.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 697.

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Date of creation: Jul 2013
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Handle: RePEc:chb:bcchwp:697
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  1. Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc.
  2. Deesomsak, Rataporn & Paudyal, Krishna & Pescetto, Gioia, 2009. "Debt maturity structure and the 1997 Asian financial crisis," Journal of Multinational Financial Management, Elsevier, vol. 19(1), pages 26-42, February.
  3. Ran Bi, 2006. "Debt Dilution and Maturity Structure of Sovereign Bonds," 2006 Meeting Papers 652, Society for Economic Dynamics.
  4. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  5. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 1999. "Institutions, financial markets, and firm debt maturity," Journal of Financial Economics, Elsevier, vol. 54(3), pages 295-336, December.
  6. Diego Saravia, 2007. "On the Role and Effects of IMF Seniority," Documentos de Trabajo 317, Instituto de Economia. Pontificia Universidad Católica de Chile..
  7. Barry Eichengreen & Ashoka Mody, 2004. "Do Collective Action Clauses Raise Borrowing Costs?," Economic Journal, Royal Economic Society, vol. 114(495), pages 247-264, 04.
  8. Barry Eichengreen & Poonam Gupta & Ashoka Mody, 2008. "Sudden Stops and IMF-Supported Programs," NBER Chapters, in: Financial Markets Volatility and Performance in Emerging Markets, pages 219-266 National Bureau of Economic Research, Inc.
  9. Leung, S.F. & Yu, S., 1992. "On the Choice Between Sample Selection and Two-Part Models," RCER Working Papers 337, University of Rochester - Center for Economic Research (RCER).
  10. Diamond, Douglas W., 1993. "Seniority and maturity of debt contracts," Journal of Financial Economics, Elsevier, vol. 33(3), pages 341-368, June.
  11. Graham Bird & Dane Rowlands, 2001. "IMF lending: how is it affected by economic, political and institutional factors?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 4(3), pages 243-270.
  12. Ashoka Mody & Diego Saravia, 2006. "Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices?," Economic Journal, Royal Economic Society, vol. 116(513), pages 843-867, 07.
  13. Wasseem Mina & Jorge Martinez-Vazquez, 2002. "IMF Lending, Maturity of International Debt and Moral Hazard," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0301, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  14. Barry Eichengreen, 2003. "Restructuring Sovereign Debt," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 75-98, Fall.
  15. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
  16. Marchesi, Silvia & Thomas, Jonathan P, 1999. "IMF Conditionality as a Screening Device," Economic Journal, Royal Economic Society, vol. 109(454), pages C111-25, March.
  17. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
  18. Axel Dreher & Silvia Marchesi & James Vreeland, 2008. "The political economy of IMF forecasts," Public Choice, Springer, vol. 137(1), pages 145-171, October.
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Cited by:

  1. Aitor Erce, 2012. "Does the IMF´s official support affect sovereign bond maturities?," Banco de Espa�a Working Papers 1231, Banco de Espa�a.
  2. Luca Papi & Andrea Filippo Presbitero & Alberto Zazzaro, 2013. "IMF Lending and Banking Crises," Mo.Fi.R. Working Papers 80, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  3. Aitor Erce, 2012. "Does the IMF's official support affect sovereign bonds maturities?," Globalization and Monetary Policy Institute Working Paper 128, Federal Reserve Bank of Dallas.

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