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Does the IMF cause moral hazard? A critical review of the evidence

  • Axel Dreher

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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File URL: http://econwpa.repec.org/eps/if/papers/0402/0402003.pdf
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Paper provided by EconWPA in its series International Finance with number 0402003.

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Date of creation: 18 Feb 2004
Date of revision: 29 Mar 2004
Handle: RePEc:wpa:wuwpif:0402003
Note: Type of Document -
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Boockmann, Bernhard & Dreher, Axel, 2002. "The Contribution of the IMF and the World Bank to Economic Freedom," ZEW Discussion Papers 02-18, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Ashley Taylor & Prasanna Gai, 2004. "International financial rescues and debtor-country moral hazard," Econometric Society 2004 Far Eastern Meetings 561, Econometric Society.
  3. Axel Dreher, 2004. "IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality," TWI Research Paper Series 1, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  4. 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.
  5. Axel Dreher, 2003. "The influence of elections on IMF programme interruptions," Journal of Development Studies, Taylor & Francis Journals, vol. 39(6), pages 101-120.
  6. Ali M. Kutan & Ayse Y. Evrensel, 2004. "Creditor Moral Hazard in Equity Markets: A Theoretical Framework and Evidence from Indonesia and Korea," William Davidson Institute Working Papers Series 2004-659, William Davidson Institute at the University of Michigan.
  7. Andrew G Haldane & Jorg Scheibe, 2004. "IMF lending and creditor moral hazard," Bank of England working papers 216, Bank of England.
  8. Giovanni Dell'Ariccia & Jeromin Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund.
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