Doing more with less: The catalytic function of IMF lending and the role of program size

Arbeitspapier

Financial assistance provided by the International Monetary Fund (IMF) is supposed to unlock other financing, acting as a catalyst for private capital flows. The empirical evidence of the presence of such a catalytic effect has, however, been mixed. This paper shows that a possible explanation for the rather inconclusive empirical evidence to date is the neglect of the size of an IMF program. Applying a novel identification strategy to account for endogenous selection into (large) adjustment programs, and using a comprehensive data set spanning the years 1990-2018, we show that the catalytic effect of IMF financial assistance is weakened - and potentially reversed - if the size of a program exceeds a certain level. We argue that large IMF financial assistance coupled with the IMF's preferred creditor status can lead to a crowding-out of private investors by increasing their loss in the event of default. Our findings add to the debate on the optimal size of Fund-supported programs and can also inform the broader policy discussions on the adequacy of IMF resources.

Angaben zum Objekt

• ISBN: 978-3-95729-695-5
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Deutsche Bundesbank Discussion Paper ; No. 18/2020

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; International Monetary Arrangements and Institutions ; Financial Aspects of Economic Integration ; Financial Crises ; International Financial Markets
• Thema: International Monetary Fund ; catalysis ; capital flows ; financial crises

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Krahnke, Tobias
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/215804
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ