Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending

November 1, 2002

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Format: Chicago

Curzio Giannini, and Carlo Cottarelli. Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending, (USA: International Monetary Fund, 2002) accessed April 29, 2025

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

During the 1990s, the concept of "catalytic official finance" (COF) gained prominence in policy debates. The concept revolves around the idea that the propensity of investors to lend to a country increases when the IMF provides its "seal of approval"-backed up by only limited official financing-on the country's economic program. COF aims at avoiding, on the one hand, the massive use of public money to bail out private investors; on the other, the recourse to coercive bailing-in mechanisms. The paper concludes that COF, while possibly useful in other contexts, is less reliable when used to manage capital account crises.

Subject: Balance of payments, Capital account crisis, Capital inflows, Crisis management, Current account, Financial crises

Keywords: Capital Account Crises Contents, Capital account crisis, Capital inflows, Crisis management, Current account, Current account, Europe, Financial support, IMF activity, IMF historian, IMF lending, IMF parlance, IMF program, IMF resource, IMF role, IMF seal of approval, IMF spring meeting, IMF-supported program, International Monetary Fund, Lender of Last Resort, Program country, Seal of approval, WP

Publication Details

Pages:

50
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/193
Stock No:

WPIEA1932002
ISBN:

9781451859829
ISSN:

1018-5941

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