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Doing more with less: the catalytic function of IMF lending and the role of program size
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| Type of Resource: | E-Book |
| Language: | English |
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Deutsche Bundesbank: Discussion paper ; no 2020, 18
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| Subjects: | |
| Source: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| ISBN: | 9783957296955 |
| Summary: | Financial assistance provided by the International Monetary Fund (IMF) is supposed to unlock other financing, acting as a catalyst for private capital flows. The empirical evidence of the presence of such a catalytic effect has, however, been mixed. This paper shows that a possible explanation for the rather inconclusive empirical evidence to date is the neglect of the size of an IMF program. Applying a novel identification strategy to account for endogenous selection into (large) adjustment programs, and using a comprehensive data set spanning the years 1990-2018, we show that the catalytic effect of IMF financial assistance is weakened - and potentially reversed - if the size of a program exceeds a certain level. We argue that large IMF financial assistance coupled with the IMF's preferred creditor status can lead to a crowding-out of private investors by increasing their loss in the event of default. Our findings add to the debate on the optimal size of Fund-supported programs and can also inform the broader policy discussions on the adequacy of IMF resources. |
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| Physical Description: | 1 Online-Ressource (circa 44 Seiten); Illustrationen |
| ISBN: | 9783957296955 |