Arbeitspapier
IMF-supported adjustment programs: Welfare implications and the catalytic effect
The author studies the welfare implications of adjustment programs supported by the International Monetary Fund (IMF). He uses a model where an endogenous borrowing constraint, set up by international lenders who will never lend more than a debt ceiling, forces the borrowing economy to always choose repayment over default. The immediate potential welfare cost of joining a program is driven by IMF conditionality: to be able to borrow from the IMF, the country has to submit to limits on the consumption of public goods. The benefits derive from the additional borrowing from the IMF (at a lower interest rate) and/or through a "catalytic effect" on private loans, which facilitates consumption smoothing over time. Simulations of the dynamic model in two institutional environments - with and without the IMF - are compared. Results indicate that when conditionality forces the country to save more, at a cost that does not prevent it from joining an IMF program, the resulting lower probability of default can induce private lenders to relax their borrowing constraints. Based on a calibration of the model for the Brazilian economy, the overall welfare gains associated with IMF programs are relatively small.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Working Paper ; No. 2007-22
- Klassifikation
-
Wirtschaft
Current Account Adjustment; Short-term Capital Movements
International Monetary Arrangements and Institutions
International Lending and Debt Problems
Open Economy Macroeconomics
- Thema
-
Internationale Wirtschaftshilfe
Internationaler Kredit
Verschuldungsrestriktion
Wohlfahrtseffekt
Wirtschaftsmodell
Brasilien
- Ereignis
-
Geistige Schöpfung
- (wer)
-
De Resende, Carlos
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2007
- DOI
-
doi:10.34989/swp-2007-22
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- De Resende, Carlos
- Bank of Canada
Entstanden
- 2007
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