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From Crisis to IMF-Supported Program: Does democracy impede the speed required by financial markets?

Author/Editor: Mody, Ashoka | Saravia, Diego
Authorized for Distribution: December 1, 2008
Electronic Access: Free Full Text (PDF file size is 1,060KB)
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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: Has the spread of democracy and political participation impeded the need for speed required by financial markets and the elevated threat of contagion across borders? We examine the time span between the onset of a financial crisis and the agreement on an IMF-supported adjustment program. This span appears to have decreased over time. More precisely, we find that the time from a crisis to the approval of a program has been smaller the more serious the crisis. Importantly, this responsiveness to a widening range of financial vulnerabilities has increased with growing financial integration. Democracies, particularly those with checks and balances, have been sensitive to time pressures.
 
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Series: Working Paper No. 08/276
Subject(s): Financial crisis | Fund arrangements | Political economy | Capital markets | Economic integration | Relationships with Fund | Globalization
Author's keyword(s): IMF | Financial Crises | Democracy
 
English  
    Published:   December 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008276   Pages:   33
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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