## The Role of IMF Support in Crisis Prevention

_IMF Working Papers, March 1, 2006_

## Source details

**Canonical URL:** [The Role of IMF Support in Crisis Prevention](https://www.imf.org/en/publications/wp/issues/2016/12/31/the-role-of-imf-support-in-crisis-prevention-19035)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/the-role-of-imf-support-in-crisis-prevention-19035/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/the-role-of-imf-support-in-crisis-prevention-19035/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/the-role-of-imf-support-in-crisis-prevention-19035/bundle-manifest.json)

## Bibliographic details
- Authors: Uma Ramakrishnan, Juan Zalduendo
- Published: March 1, 2006
- Series: IMF Working Papers

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### Summary of purpose and scope
- Examines the role of IMF-supported programs in crisis prevention, specifically whether, conditional on an episode of intense market pressures, IMF financial support helps prevent a capital account crisis from developing and, if so, through what channels.
- Distinguishes between the seal of approval inherent in IMF support and its financing.
- Evaluates the interaction of IMF support with economic policies.
- Assesses whether IMF financing has a different impact on the likelihood of a crisis than other forms of liquidity.

### Main findings
- IMF financing helps prevent crises through the liquidity provided (i.e., money matters).
- The effect of IMF financing on crisis prevention holds even after controlling for (gross) foreign exchange reserves, implying that:
  - Stronger policies and the seal of approval under an IMF-supported program must also play a role.
- IMF financing as a crisis prevention tool is most effective for an intermediate range of economic fundamentals.

### Analytical focus and channels assessed
- Seal of approval versus financing: the paper separates reputational/approval effects from pure funding effects.
- Interaction with economic policies: evaluates how policy strength under IMF programs influences crisis prevention effectiveness.
- Comparison of liquidity sources: assesses whether IMF financing differs from other forms of liquidity in reducing crisis likelihood.

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## Content in this bundle

- **Classification of Capital Account Crises**
  - [Classification of Capital Account Crises (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0675.pdf.md){rel="alternate" type="text/markdown"}
  - [Classification of Capital Account Crises (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0675.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-role-of-imf-support-in-crisis-prevention-19035_