Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/40321
Authors: 
Brandes, Julia
Schüle, Tobias
Year of Publication: 
2007
Series/Report no.: 
Tübinger Diskussionsbeitrag 310
Abstract: 
This paper contributes to the debate on the efficacy of IMF's catalytic finance in preventing financial crises. Extending Morris and Shin (2006), we consider that the IMF's intervention policy usually exerts a signaling effect on private creditors and that several interventions in sequence may be necessary to avert an impending crisis. Absent of the IMF's signaling ability, our results state that repeated intervention is required to bail out a country, where by additional assistance may induce moral hazard on the debtor side. Contrarily, if the IMF exerts a strong signaling effect, one single intervention suffices to avoid liquidity crises.
Subjects: 
catalytic finance
debtor moral hazard
global games
JEL: 
C72
D82
F33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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