IMF programs and stigma in Emerging Market Economies

Claudia Maurini ()
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Claudia Maurini: Bank of Italy

No 1247, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper investigates the existence and estimates the magnitude of a financial market stigma associated with the International Monetary Fund’s non-concessional programmes. In particular, it focuses on the impact of IMF non-concessional loans on Emerging Markets’ sovereign spreads, using the propensity score matching methodology to deal with the selection bias problem. We find evidence of higher spreads for countries supported by a non-concessional IMF programme with respect to comparable countries that are not supported by such a programme. This effect may be linked to both a pure financial stigma and the (low) probability of the programme succeeding, as it tends to dissipate towards the end of the programme and to be smaller and less significant if we restrict the sample to non-repeated programmes (more likely to be successful). Finally, we find that precautionary programmes (such as the Flexible Credit Line) have a negative impact on sovereign spreads.

Keywords: International Monetary Fund; propensity score matching; sovereign spreads; emerging market economies (search for similar items in EconPapers)
JEL-codes: E44 F33 F44 F55 G15 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-mac and nep-opm
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