Catalyzing Capital Flows: Do IMF-Supported Programs Work As Commitment Devices?
May 1, 2003
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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.
Subject: Balance of payments, Bonds, Capital flows, Capital markets, Financial institutions, Financial markets, Imports, International capital markets, International trade
Keywords: Bonds, Capital flows, capital market access, Capital markets, Fund effectiveness, Fund program, Fund resource, Global, IMF funds, IMF lending, IMF program, IMF programs, Imports, International capital markets, signaling, Treasurer's Department note, WP
Pages:
32
Volume:
2003
DOI:
Issue:
100
Series:
Working Paper No. 2003/100
Stock No:
WPIEA1002003
ISBN:
9781451852424
ISSN:
1018-5941
