Memorable Encounters? Own and Neighbours' Experience with IMF Conditionality and IMF Stigma

Andone, Irina; Scheubel, Beatrice

doi:10.2139/ssrn.2954503

Cited by 15 publications

(1 citation statement)

References 19 publications

(31 reference statements)

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“…Beyond the case of hidden debt, scholars have theorized about the effects of IMF scrutiny on government behavior in other contexts. Hyde and O'Mahony (2010) and Ebeke and Ölcer (2013) show that leaders reduce fiscal manipulation when IMF programs begin because they expect additional monitoring of public budgets, and Andone and Scheubel (2017) argue that secretive countries may avoid loan programs altogether to prevent the IMF from observing government economic interventions. If rational governments intentionally hide debt, they should reduce this behavior while IMF loan programs are underway to offset the heightened risk of exposing their true debt burden.…”

Section: Testable Hypothesesmentioning

confidence: 99%

Why hide? Africa’s unreported debt to China

Brown

2023

Rev Int Organ

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Hidden debt is endemic throughout the sovereign credit market and poses a serious threat to global financial stability. Yet, little is known about why governments conceal their liabilities from creditors. I argue that governments intentionally hide debts from international financial institutions (IFIs) to maximize their ability to borrow while avoiding punishment for rising debt burdens. IFIs frequently penalize governments in low-income countries for borrowing beyond their means. By hiding some debt, governments are able to continue borrowing without being disciplined. I test this using recently released data that reveals half of the Chinese loans in Sub-Saharan Africa are missing from sovereign debt records. I find that borrower governments hide loans to avoid violating World Bank debt sustainability thresholds. However, governments hide less debt while under IMF scrutiny so as to reduce the risk that they will be discovered and punished. These findings offer evidence that borrower governments use hidden debt as a strategic tool to pursue fiscal goals. Further, this work reveals the unintended consequences of IFI intervention in less-developed countries, as efforts to ensure fiscal stability increase governments’ incentives to hide debt.

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Section: Testable Hypothesesmentioning

confidence: 99%

Why hide? Africa’s unreported debt to China

Brown

2023

Rev Int Organ

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Closing time: Reputational constraints on capital account policy in emerging markets

Liao

McDowell

2021

Rev Int Organ

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Do international reputational concerns constrain governments’ economic policy choices? We assess this question by analyzing emerging market decisions to tighten restrictions on capital outflows. While policymakers should be more likely to tighten restrictions to protect their economies as capital flow volatility (CFV) increases, investors view outflow controls as heterodox policies that violate investment contracts. We argue that the effect of CFV on outflow controls depends on the use of controls in peer markets. When peers are open, governments anticipate that controls will come at a high cost to their market reputations as heterodox measures send a negative signal to investors among a crowd of liberal peers. Conversely, when peers are closed, using controls should do less damage to an economy’s reputation. For 25 emerging markets from 1995–2015, we show that CFV is associated with outflow controls, but only when market peers are already closed, suggesting reputational concerns can limit policy autonomy. Supplementary Information The online version contains supplementary material available at 10.1007/s11558-021-09433-1.

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What do we know about the global financial safety net? A new comprehensive data set

Scheubel

Stracca

2019

Journal of International Money and Finance

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This paper critically reviews the theoretical basis for the provision of the global financial safety net (GFSN) and provide a comprehensive database covering four elements of the GFSN (foreign exchange reserves, IMF financing, central bank swap lines and regional financing arrangements) for over 150 countries in the sample period 1960-2015. This paper also presents some key stylised facts regarding the provision of GFSN financing and compares macroeconomic outcomes in capital flow reversal episodes depending on how much GFSN financing was available to countries. Finally, this paper concludes with some avenues for further research on the possible evolution of the GFSN. JEL-Codes: F320, F330, F340, G010, H870.

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Memorable Encounters? Own and Neighbours' Experience with IMF Conditionality and IMF Stigma

Cited by 15 publications

References 19 publications

Why hide? Africa’s unreported debt to China

Why hide? Africa’s unreported debt to China

Closing time: Reputational constraints on capital account policy in emerging markets

What do we know about the global financial safety net? A new comprehensive data set

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