Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185537
Authors: 
Gehring, Kai
Lang, Valentin F.
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7339
Abstract: 
IMF programs are often considered to carry a “stigma” that triggers adverse market reactions. We show that such a negative IMF effect disappears when accounting for endogenous selection into programs. To proxy for a country’s access to financial markets, we use credit ratings and investor assessments for 100 countries from 1987 to 2013. Our first identification strategy exploits the differential effect of changes in IMF liquidity on loan allocation. We find that the IMF can “cushion” against falling creditworthiness, despite contractionary adjustments resulting from its programs. A second, event-based strategy using country-times-year fixed effects supports this positive signaling effect. A supplementary text analysis of rating statements validates that agencies perceive IMF programs as positive, particularly when they are associated with reform commitments.
Subjects: 
International Monetary Fund
sovereign credit ratings
capital market accss
creditworthiness
financial crises
JEL: 
E44
F33
F34
G24
Document Type: 
Working Paper

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