Sudden Stops and IMF-Supported Programs

Author/Editor:

Barry J. Eichengreen ; Poonam Gupta ; Ashoka Mody

Publication Date:

April 1, 2006

Electronic Access:

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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:

Could a high-access, quick-disbursing "insurance facility" in the IMF help to reduce the incidence of sharp interruptions in capital flows ("sudden stops")? We contribute to the debate around this question by analyzing the impact of conventional IMF-supported programs on the incidence of sudden stops. Correcting for the non-random assignment of programs, we find that sudden stops are fewer and generally less severe when an IMF arrangement exists and that this form of "insurance" works best for countries with strong fundamentals. In contrast there is no evidence that a Fund-supported program attenuates the output effects of capital account reversals if these nonetheless occur.

Series:

Working Paper No. 2006/101

Subject:

Capital flows Current account Domestic credit Exchange rate arrangements Sudden stops

English

Publication Date:

April 1, 2006

ISBN/ISSN:

9781451863611/1018-5941

Stock No:

WPIEA2006101

Pages:

53

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