Does the IMF cause moral hazard? A critical review of the evidence
The paper provides a critical review of empirical studies on IMF induced moral hazard. Taken together, there is considerable evidence that the insurance provided by the Fund leads to moral hazard with investors in bond markets, while moral hazard in equity markets has so far not been convincingly tested. Debtor moral hazard has much less frequently been investigated, and the counterfactual is more difficult to construct. There is, however, evidence that debtor governments’ policies are negatively influenced by the insurance. Their policies are more expansive leading to higher probabilities of IMF programs and shorter inter-program-periods.
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- Axel Dreher, 2004.
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0404004, EconWPA, revised 25 Apr 2004.
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- Bernhard Boockmann & Axel Dreher, 2002.
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- Boockmann, Bernhard & Dreher, Axel, 2003. "The contribution of the IMF and the World Bank to economic freedom," European Journal of Political Economy, Elsevier, vol. 19(3), pages 633-649, September.
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- Axel Dreher & Roland Vaubel, 2004. "Do IMF and IBRD Cause Moral Hazard and Political Business Cycles? Evidence from Panel Data," Open Economies Review, Springer, vol. 15(1), pages 5-22, January.
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