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Commercial banks, default insurance and IMF reforms

Author

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  • Rockerbie, Duane W.
  • Easton, Stephen T.

Abstract

This paper discusses, in a very general way, a system of IMF insurance against sovereign default that could be offered to private lenders and banking groups. The system could overcome many of the current issues that plague the international private lending market, such as moral hazard on the part of private lenders, capital flight, and so on. How the insurance could be priced is also discussed in an appendix. Private lender membership in the IMF is also discussed. This would provide the IMF with some of the powers that central banks now have.

Suggested Citation

  • Rockerbie, Duane W. & Easton, Stephen T., 2009. "Commercial banks, default insurance and IMF reforms," Economics Discussion Papers 2009-39, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:200939
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    References listed on IDEAS

    as
    1. Martin S. Edwards, 2005. "Investor Responses to IMF Program Suspensions: Is Noncompliance Costly?," Social Science Quarterly, Southwestern Social Science Association, vol. 86(4), pages 857-873.
    2. Eichengreen, Barry & Ruhl, Christof, 2001. "The bail-in problem: systematic goals, ad hoc means," Economic Systems, Elsevier, vol. 25(1), pages 3-32, March.
    3. 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.
    4. Rudi Dornbusch, 2001. "Fewer Monies, Better Monies," American Economic Review, American Economic Association, vol. 91(2), pages 238-242, May.
    5. Lerrick, Adam & Meltzer, Allan H., 2003. "Blueprint for an international lender of last resort," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 289-303, January.
    6. Miller, Marcus & Zhang, Lei, 2000. "Sovereign Liquidity Crises: The Strategic Case for a Payments Standstill," Economic Journal, Royal Economic Society, vol. 110(460), pages 335-362, January.
    7. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
    8. Babbel, D.F., 1996. "Insuring Sovereign Debt Against Default," World Bank - Discussion Papers 328, World Bank.
    9. Michael Hutchison, 2003. "A Cure Worse Than the Disease? Currency Crises and the Output Costs of IMF-Supported Stabilization Programs," NBER Chapters,in: Managing Currency Crises in Emerging Markets, pages 321-360 National Bureau of Economic Research, Inc.
    10. Burcu Eke & Ali M Kutan, 2005. "IMF-Supported Programmes in Transition Economies: Are They Effective?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 47(1), pages 23-40, March.
    11. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Sovereign debt; insurance; option value; IMF;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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