IMF's Assistance : Devil's Kiss or Guardian Angel?

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Dokumentart: WorkingPaper
Date: 2007
Source: Tübinger Diskussionsbeiträge der Wirtschaftswissenschaftlichen Fakultät ; 310
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Internationaler Währungsfonds , Krise , Intervention
Other Keywords:
catalytic finance , debtor moral hazard , global games
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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, whereby 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.

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