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Catalytic Finance: When Does It Work?

  • Stephen Morris


    (Yale University, Cowles Foundation)

  • Hyun Song Shin


    (University of London, London School of Economics & Political Science (LSE), Department of Accounting and Finance)

n a simple model of currency crises caused by creditor coordination failure, we show that bailouts that reduce ex post inefficiency will sometimes create ex ante moral hazard but will sometimes enhance the incentives for governments to take preventative actions. This model helps us understand a debate about the role of the IMF in catalyzing lending to developing countries.

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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm339.

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Date of creation: 28 Jul 2004
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Handle: RePEc:ysm:somwrk:ysm339
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  1. Olivier Jeanne & Jeromin Zettelmeyer, 2004. "The Mussa Theorem (and Other Results on IMF-Induced Moral Hazard)," IMF Working Papers 04/192, International Monetary Fund.
  2. Jean-Charles Rochet & Xavier Vives, 2002. "Coordination failures and the lender of last resort: was Bagehot right after all?," LSE Research Online Documents on Economics 24928, London School of Economics and Political Science, LSE Library.
  3. Marchesi, Silvia, 2003. "Adoption of an IMF programme and debt rescheduling. An empirical analysis," Journal of Development Economics, Elsevier, vol. 70(2), pages 403-423, April.
  4. Tito Cordella & Eduardo Levy Yeyati, 2005. "Country Insurance," IMF Staff Papers, Palgrave Macmillan, vol. 52(si), pages 6.
  5. Hyun Song Shin & Stephen Morris, 2001. "Coordination Risk and the Price of Debt," FMG Discussion Papers dp373, Financial Markets Group.
  6. Itay Goldstein & Ady Pauzner, 2005. "Demand-Deposit Contracts and the Probability of Bank Runs," Journal of Finance, American Finance Association, vol. 60(3), pages 1293-1327, 06.
  7. Diego Saravia & Ashoka Mody, 2003. "Catalyzing Capital Flows: Do IMF-Supported Programs Work As Commitment Devices?," IMF Working Papers 03/100, International Monetary Fund.
  8. Hyun Song Shin & Giancarlo Corsetti & Amil Dasgupta & Stephen Morris, 2001. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," FMG Discussion Papers dp372, Financial Markets Group.
  9. Eichengreen, Barry & Kletzer, Kenneth & Mody, Ashoka, 2003. "Crisis Resolution: Next Steps," Santa Cruz Department of Economics, Working Paper Series qt4cj974r4, Department of Economics, UC Santa Cruz.
  10. Jeffrey A. Frankel & Nouriel Roubini, 2001. "The Role of Industrial Country Policies in Emerging Market Crises," NBER Working Papers 8634, National Bureau of Economic Research, Inc.
  11. 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.
  12. Olivier Jeanne, 2001. "The International Lender of Last Resort: How Large is Large Enought?," IMF Working Papers 01/76, International Monetary Fund.
  13. Curzio Giannini & Carlo Cottarelli, 2002. "Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending," IMF Working Papers 02/193, International Monetary Fund.
  14. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-97, June.
  15. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2004. "Coordination and Policy Traps," Levine's Bibliography 122247000000000294, UCLA Department of Economics.
  16. Ales Bulir & Marianne Schulze-Gattas & Atish R. Ghosh & Alex Mourmouras & A. Javier Hamann & Timothy D. Lane, 2002. "IMF-Supported Programs in Capital Account Crises: Design and Experience," IMF Occasional Papers 210, International Monetary Fund.
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