EconStor >
Philipps-Universität Marburg >
Faculty of Business Administration and Economics, Philipps-Universität Marburg >
MAGKS Joint Discussion Paper Series in Economics, Universität Marburg >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/56520
  
Title:The effect of IMF lending on the probability of sovereign debt crises PDF Logo
Authors:Jorra, Markus
Issue Date:2010
Series/Report no.:Joint discussion paper series in economics 26-2010
Abstract:This paper explores empirically how the adoption of IMF programs affects sovereign risk over the medium term. We find that IMF programs significantly increase the probability of subsequent sovereign defaults by approximately 1.5 to 2 percentage points. These results cannot be attributed to endogeneity bias as they are supported by specifications that explain sovereign defaults and program participation simultaneously. Furthermore, IMF programs turn out to be especially detrimental to fiscal solvency when the Fund distributes its resources to countries whose economic fundamentals are already weak. Our evidence is therefore consistent with the hypothesis that debtor moral hazard is most likely to occur in these circumstances. Other explanations that point to the effects of debt dilution and the possibility of IMF triggered debt runs, however, are also possible.
Subjects:IMF programs
sovereign defaults
bivariate probit
international financial architecture
JEL:F33
F34
C25
C35
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

Files in This Item:
File Description SizeFormat
63853853X.pdf317.06 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/56520

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.