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Catalyzing Capital Flows: Do IMF-Supported Programs Work as Commitment Devices?

Author/Editor: Mody, Ashoka | Saravia, Diego
Authorized for Distribution: May 1, 2003
Electronic Access: Free Full Text (PDF file size is 1,297KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: An objective of IMF-supported programs is to help countries improve their access to international capital markets. In this paper, we examine the issue whether IMF-supported programs influence the ability of developing country issuers to tap international bond markets and whether they improve spreads paid on the bonds issued. We find that IMF-supported programs do not provide a uniformly favorable signaling effect-that is, the mere existence of a program supported by the IMF does not act as a strong "seal of good housekeeping." Instead, the evidence is most consistent with a positive effect of IMF-supported programs when they are viewed as likely to lead to policy reform and when undertaken before economic fundamentals have deteriorated significantly. The size of the IMF-supported program matters, but the credibility of a joint commitment by the country and the IMF appears to be critical.
 
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Series: Working Paper No. 03/100
Subject(s): Capital flows | Fund-supported adjustment programs | Access to capital markets
Author's keyword(s): IMF programs | signaling | capital market access
 
English  
    Published:   May 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1002003   Pages:   37
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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