Stigma or cushion? IMF programs and sovereign creditworthiness

Gehring, Kai; Lang, Valentin

doi:10.1016/j.jdeveco.2020.102507

Cited by 31 publications

(45 citation statements)

References 62 publications

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“…The limited effect on private capital flows is somewhat confirmed by Erce and Riera-Crichton (2015) who find that an IMF programme does not catalyse foreign capital, albeit encouraging domestic investors to repatriate their foreign assets. Chapman et al (2015) and Gehring and Lang (2018) are exceptions in that they (at least partly) also look at monthly data. While Chapman et al (2015) find an overall negative effect of IMF programmes on countries' short-term borrowing costs, Gehring and Lang (2018) suggest that IMF programmes provide a positive signal and affect sovereign ratings positively.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Chapman et al (2015) and Gehring and Lang (2018) are exceptions in that they (at least partly) also look at monthly data. While Chapman et al (2015) find an overall negative effect of IMF programmes on countries' short-term borrowing costs, Gehring and Lang (2018) suggest that IMF programmes provide a positive signal and affect sovereign ratings positively. Our work is closest to Chapman et al (2015) in design in that we do not build on annual data at all and look at short-term treasury bill rates.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, both Chapman et al (2015) and Gehring and Lang (2018) rely on standard instruments for addressing potential endogeneity while we exploit the higher frequency nature of the data to do so. Our results resonate with the claim by Chapman et al (2015) that market effects of IMF programmes are heterogenous across countries, but in contrast to both studies we also estimate the heterogeneity across countries and show that the financial market effects of IMF programmes are neither universally bad nor universally good.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Annual data has been used extensively in studies on the effects of IMF programmes (e.g.Mody and Saravia, 2006;van der Veer and de Jong, 2014;Bas and Stone, 2014;Gehring and Lang, 2018).ECB Working Paper Series No 2198 / November 2018…”

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confidence: 99%

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Stigma? What Stigma? A Contribution to the Debate on Financial Market Effects of IMF Lending

Scheubel¹,

Tafuro²,

Vonessen³

2018

SSRN Journal

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

mentioning

confidence: 99%

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Stigma? What Stigma? A Contribution to the Debate on Financial Market Effects of IMF Lending

Scheubel¹,

Tafuro²,

Vonessen³

2018

SSRN Journal

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“…The other group says that even though it is undoubtedly the last resort, it is not required because the IMF imposes certain conditions on the country that may resist the political support that is always needed for structural reforms. Undoubtedly, when a country enters into IMF programs, the decision has deep-rooted effects on its different stakeholders (Bordo & Schwartz, 2000;Gehring & Valentin, 2020). Primarily, any developing country responds rigorously to any macrofinancial hilarious.…”

Section: Introductionmentioning

confidence: 99%

Impact of Imf Lending Announcements on the Performance of Stock Market: Empirical Evidence From Pakistan

Azeem

Ahmad

Hussain

et al. 2021

HSSR

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Purpose of the study: Stock markets have demonstrated varying reactions to IMF lending announcements across various economies. Announcements offered by IMF often be perceived negatively by the participants of the stock market, because of stringent conditions accompanied with the loan that may oppose the political and economic agenda of a borrowing nation. Thus, this study intends to investigate the impact of IMF’s announcements about extending loans to Pakistan on the performance of the Stock market in the debt-ridden economy. Methodology: For regular returns from 1997 to 2017, the benchmarking indexes of KSE-100 and 30 were used. Meanwhile, IMF lending arrangements are categorized into three respective dummies (standby, extended credit facility, and extended fund facility). The Generalized Autoregressive Conditional Heteroscedastic (GARCH) model was used to investigate the effect of IMF’s lending news on the regular stock returns. Main findings: The results show a statistically significant effect of the IMF’s News about lending arrangements on the performance of the stock market in Pakistan. Surprisingly, the negative effect of IMF lending announcements on the performance of the stock market in Pakistan implies that the loans extended by IMF are not professed by speculators as good for the economic performance of the economy. Application of this study: The findings of this study imply that simply extending loans is not a panacea for politically unstable and financially ruined nations. Lending strategies of IMF need to be favourable for the political and economic conditions of a borrowing country. Originality/ Novelty: As for as the novelty is concerned, the study has highlighted the time-varying impact of IMF lending announcements on the performance of the stock market in a financially fragile country where a newborn government facing multiple challenges has made its best effort to avoid borrowing from IMF.

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