Does the IMF cause moral hazard? A critical review of the evidence

Axel Dreher ()

International Finance from EconWPA

Abstract: The paper provides a critical review of empirical studies on IMF induced moral hazard. Taken together, there is considerable evidence that the insurance provided by the Fund leads to moral hazard with investors in bond markets, while moral hazard in equity markets has so far not been convincingly tested. Debtor moral hazard has much less frequently been investigated, and the counterfactual is more difficult to construct. There is, however, evidence that debtor governments’ policies are negatively influenced by the insurance. Their policies are more expansive leading to higher probabilities of IMF programs and shorter inter-program-periods.

JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his
Date: 2004-02-18, Revised 2004-12-20
Note: Type of Document -
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0402003

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