International bailouts, moral hazard and conditionality

Olivier Jeanne and Jeromin Zettelmeyer

Economic Policy, 2001, vol. 16, issue 33, 408-432

Abstract: Summary International Bailouts The IMF's roleThe large international bailouts of the 1990s have been criticized for generating moral hazard at the expense of the global taxpayer. We argue that this criticism is misleading because international bailouts create no, or very few, costs to the international community. Instead, the problem is to ensure that bailouts are not used to facilitate bad domestic policies, thus creating moral hazard at the expense of domestic taxpayers. This may require a shift towards ex ante conditionality, in the sense that the availability and size of official crisis lending need to be conditional on government policies before the crisis.— Olivier Jeanne and Jeromin Zettelmeyer

Date: 2001
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Working Paper: International Bailouts, Moral Hazard, and Conditionality (2001)
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