IMF Lending and Banking Crises

Luca Papi, Andrea Presbitero and Alberto Zazzaro ()

No 80, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: In this paper we look at the effect of International Monetary Fund (IMF) lending programs on banking crises in a large sample of developing countries, over the period 1965-2010. The endogeneity of the Fund intervention is addressed by adopting an instrumental variable (IV) strategy, in which the degree of political similarity between IMF borrowers and the G-7 is taken as an instrument for the likelihood of a country signing an IMF lending arrangement. Controlling for the standard determinants of banking crises, the IV estimates suggest that previous IMF borrowers are significantly less likely to experience a banking crisis. We also provide evidence suggesting that compliance with conditionality matters, consistent with the importance of IMF-supported financial reform, and that the positive effect of the Fund intervention on banking sector stability works through a direct liquidity provision effect.

Keywords: Banking crises; IMF programs; Political economy (search for similar items in EconPapers)
JEL-codes: F33 F34 F35 O11 (search for similar items in EconPapers)
Pages: 34
Date: 2013-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir080.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: IMF Lending and Banking Crises (2015)
Working Paper: IMF Lending and Banking Crises (2015)
Working Paper: IMF Lending and Banking Crises (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:anc:wmofir:80

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