IMF Bailouts and Moral Hazard

Jong-Wha Lee () and Kwanho Shin ()

International Finance from EconWPA

Abstract: This paper empirically investigates the extent of investor moral hazard associated with IMF bailouts by analyzing the responses of sovereign bond spreads to the changes in the perceived probability of IMF bailouts of countries undergoing financial crisis. We do not find strong evidence that the extent of investor moral hazard changed after the non-bailout of Russia in August 1998 that signaled a modification to IMF intervention policy. In contrast, we find evidence that investor moral hazard is intensified for those countries that have stronger political connections to the IMF and that are thereby more likely to be bailed out by the IMF. This pattern prevailed even after the Russian crisis.

Keywords: IMF; moral hazard; sovereign bond spreads; international financial architecture (search for similar items in EconPapers)
JEL-codes: F33 F34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2005-01-28
Note: Type of Document - pdf; pages: 36
View list of references View citations in EconPapers

Downloads: (external link)
http://129.3.20.41/eps/if/papers/0501/0501005.pdf (application/pdf)

Related works:
Journal Article: IMF bailouts and moral hazard (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0501005

Access Statistics for this paper

More papers in International Finance from EconWPA
Series data maintained by EconWPA ().