The mixed blessing of IMF intervention: Signalling versus liquidity support

Zwart, Sanne

doi:10.1016/j.jfs.2007.04.001

Cited by 18 publications

(13 citation statements)

References 26 publications

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“…Despite that, the phenomenon observed might have some additional explanations related to the IMF presence itself. Although IMF programs are supposed to benefit a country, it might be really bad news and an equally bad signal to other economic entities that the IMF believes that intervention is necessary (Zwart, 2007). Such negative signals usually result to having deteriorating effects on Sovereign rating due just to the presence of IMF in an economy.…”

Section: Discussionmentioning

confidence: 99%

IMF programs and policies assessment in the transition economies during the transition and the post-transition period

Bellos

2016

Journal of Heterodox Economics

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We analyze empirically whether IMF financial assistance in 31 transition countries, during the transition and the post-transition period, has achieved the purposes stated in the IMF's own articles of agreement, namely employment enhancement, confidence provision and export promotion. By employing panel data and impact evaluation analysis, we find that IMF presence persistently fails to be correlated with upgrades in sovereign rating, FDI attraction and employment improvement. By focusing on specific IMF policies, we present some intriguing results, which reveal whether these individual policies actually contribute to the achievement of the official IMF purposes or not.

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Section: Discussionmentioning

confidence: 99%

IMF programs and policies assessment in the transition economies during the transition and the post-transition period

Bellos

2016

Journal of Heterodox Economics

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“…Instead, opponents argue that such policies generate moral hazard both for debtors and creditors, and that the Fund's seniority status is detrimental to the debtor-creditor relationship as it might dilute private obligations (Saravia, 2013). In a framework of panic-driven liquidity runs, Zwart (2007) quali…es the results in Corsetti et al (2006) by showing that catalysis may not materialize given that, through its signaling e¤ect, IMF support can trigger capital ‡ight. 3 An extensive literature has studied empirically the signi…cance of the IMF´s catalytic e¤ect, delivering at best mixed evidence.…”

Section: Catalytic Imf Lending: a Review Of The Literaturementioning

confidence: 99%

Catalytic IMF? A Gross Flows Approach

Erce¹,

Riera‐Crichton

2015

gwp

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The financial assistance the International Monetary Fund (IMF) provides is assumed to catalyze fresh investment. Such a catalytic effect has, however, proven empirically elusive. This paper deviates from the standard approach based on the net capital inflow to study instead the IMF's catalytic role in the context of gross capital flows. Using fixed-effects regressions, instrumental variables and local projection methods, we find significant differences in how resident and foreign investors react to IMF programs as well as in inward and outward flows. While IMF lending does not catalyze foreign capital, it does affect the behavior of resident investors, who are both less likely to place their savings abroad and more likely to repatriate their foreign assets. As domestic banks' flows drive this effect, we conclude that IMF catalysis is "a banking story". In comparing the effects across crisis types, we find that the effect of the IMF on resident investors is strongest during sovereign defaults, and that it exerts the least effect on foreign investors during bank crises. AbstractThe …nancial assistance the International Monetary Fund (IMF) provides is assumed to catalyze fresh investment. Such a catalytic e¤ect has, however, proven empirically elusive. This paper deviates from the standard approach based on the net capital in ‡ow to study instead the IMF's catalytic role in the context of gross capital ‡ows. Using …xed-e¤ects regressions, instrumental variables and local projection methods, we …nd signi…cant di¤erences in how resident and foreign investors react to IMF programs as well as in inward and outward ‡ows. While IMF lending does not catalyze foreign capital, it does a¤ect the behavior of resident investors, who are both less likely to place their savings abroad and more likely to repatriate their foreign assets. As domestic banks' ‡ows drive this e¤ect, we conclude that IMF catalysis is "a banking story". In comparing the e¤ects across crisis types, we …nd that the e¤ect of the IMF on resident investors is strongest during sovereign defaults, and that it exerts the least e¤ect on foreign investors during bank crises.

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“…Depending on the application of interest, the policy maker could be a central bank trying to avoid the devaluation of a currency (Obstfeld 1996, Morris andShin 1998), a debtor trying to convince creditors to roll over their loans (Calvo 1988, Corsetti et al 2006, Zwart 2007), a dictator trying to prevent political unrest (Edmond forthcoming), or a party leader trying to keep the party united (Dewan and Myatt 2007). As we explain below, the payoff structure we assume is sufficiently flexible to permit any of these possible interpretations of our framework.…”

Section: Modelmentioning

confidence: 99%

Selection-free predictions in global games with endogenous information and multiple equilibria

Angeletos

Pavan²

2013

Theoretical Economics

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Global games with endogenous information often exhibit multiple equilibria. In this paper, we show how one can nevertheless identify useful predictions that are robust across all equilibria and that cannot be delivered in the common‐knowledge counterparts of these games. Our analysis is conducted within a flexible family of games of regime change, which have been used to model, inter alia, speculative currency attacks, debt crises, and political change. The endogeneity of information originates in the signaling role of policy choices. A novel procedure of iterated elimination of nonequilibrium strategies is used to deliver probabilistic predictions that an outside observer—an econometrician—can form under arbitrary equilibrium selections. The sharpness of these predictions improves as the noise gets smaller, but disappears in the complete‐information version of the model.

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The mixed blessing of IMF intervention: Signalling versus liquidity support

Cited by 18 publications

References 26 publications

IMF programs and policies assessment in the transition economies during the transition and the post-transition period

IMF programs and policies assessment in the transition economies during the transition and the post-transition period

Catalytic IMF? A Gross Flows Approach

Selection-free predictions in global games with endogenous information and multiple equilibria

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