A Model of the Imf As a Coinsurance Arrangement
The paper shows that a coinsurance arrangement among countries can, in principle, play a useful role in helping countries bear the risks involved in developing their economies and integrating into the global financial system. The operation of the coinsurance arrangement is examined under different loan contracts offered by the IMF. The analysis suggests that, if the IMF’s objective is to safeguard its resources and be concerned about the welfare of the borrower, an ex ante loan contract is more likely to create the right incentives—induce higher effort by member countries to avoid and overcome crises—than an ex-post loan contract. Such ex ante contracts highlight the need for precommitment to contend with the Samaritan’s dilemma and time inconsistency. The paper also shows that state-contingent repayment schemes are needed to deal with King Lear’s dilemma.
|Date of creation:||01 Nov 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mohsin S. Khan & Sunil Sharma, 2003. "IMF Conditionality and Country Ownership of Adjustment Programs," World Bank Research Observer, World Bank Group, vol. 18(2), pages 227-248.
- Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-90, March.
- Morris Goldstein, 2000. "Strengthening the International Financial Architecture: Where Do We Stand?," Working Paper Series WP00-8, Peterson Institute for International Economics.
- Neil Bruce & Michael Waldman, 1986.
"The Rotten-Kid Theorem Meets the Samaritan's Dilemma,"
UCLA Economics Working Papers
402, UCLA Department of Economics.
- Bruce, Neil & Waldman, Michael, 1990. "The Rotten-Kid Theorem Meets the Samaritan's Dilemma," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 155-65, February.
- Neil Bruce & Michael Waldman, 1986. "The Rotten-Kid Theorem Meets the Samaritan's Dilemma," Working Papers 650, Queen's University, Department of Economics.
- Capie, Forrest, 1998. "Can There Be an International Lender-of-Last Resort?," International Finance, Wiley Blackwell, vol. 1(2), pages 311-25, December.
- Anne O. Krueger, 1997.
"Whither the World Bank and the IMF?,"
NBER Working Papers
6327, National Bureau of Economic Research, Inc.
- Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
- Bernheim, B Douglas & Stark, Oded, 1988. "Altruism within the Family Reconsidered: Do Nice Guys Finish Last?," American Economic Review, American Economic Association, vol. 78(5), pages 1034-45, December.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Jaewoo Lee, 2004. "Insurance Value of International Reserves: An Option Pricing Approach," IMF Working Papers 04/175, International Monetary Fund.
- Lindbeck, Assar & Weibull, Jorgen W, 1988. "Altruism and Time Consistency: The Economics of Fait Accompli," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1165-82, December.
- Armendariz de Aghion, Beatriz, 1999. "On the design of a credit agreement with peer monitoring," Journal of Development Economics, Elsevier, vol. 60(1), pages 79-104, October.
- Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
- Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:04/219. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.