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IMF Programs and Financial Flows to Offshore Centers

Author

Listed:
  • Shekhar Aiyar

    (Johns Hopkins SAIS, Bruegel and NCAER)

  • Manasa Patnam

    (International Monetary Fund)

Abstract

This paper examines whether IMF lending is associated with increases in outflows to offshore financial centers (OFCs), known for bank secrecy and asset protection, relative to other international destinations. Using quarterly data from the BIS on bilateral bank deposits, we are unable to detect any positive and statistically significant effect of IMF loan disbursements on bank deposits in OFCs. The result holds even after restricting the sample to the duration of the IMF program, where disbursement quarters and non-disbursement quarters should be subject to similar degrees of macroeconomic stress. It is also robust to using the scheduled tranche of disbursements as an instrument for actual disbursements. While the effects vary by the type and conditionality of the IMF program, as well as the amount of lending, none of the effects are found to be positive and statistically significant. We also estimate whether the recent surge in emergency lending, during the Covid-19 crisis, is associated with an increase in outflows to OFCsbut find no evidence to support this.

Suggested Citation

  • Shekhar Aiyar & Manasa Patnam, 2024. "IMF Programs and Financial Flows to Offshore Centers," NCAER Working Papers 159, National Council of Applied Economic Research.
    • Handle: RePEc:nca:ncaerw:159
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    File URL: https://www.ncaer.org/publication/imf-programs-and-financial-flows-to-offshore-centers
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    Cited by:

    1. Kern, Andreas & Nosrati, Elias & Reinsberg, Bernhard & Sevinc, Dilek, 2023. "Crash for cash: Offshore financial destinations and IMF programs," European Journal of Political Economy, Elsevier, vol. 78(C).

    More about this item

    Keywords

    Financial Flows; Aid; Corruption; Governance.;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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