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Does the IMF´s official support affect sovereign bond maturities?

Aitor Erce

No 1231, Working Papers from Banco de España

Abstract: This paper looks at whether the tendency of some governments to borrow short term is reinforced by financial support from the International Monetary Fund. I first present a model of sovereign debt issuance at various maturities featuring endogenous liquidity crises and maturity mismatches due to financial underdevelopment. I use the model to analyse the impact of IMF lending during debt crises on the sovereign’s optimal maturity structure. Within the model, although IMF assistance is able to catalyse private flows, this provides incentives for government to issue larger amounts of short-term debt, making the roll-over problem larger. I take the model to the data and find support for the hypothesis that IMF lending leads countries to increase their short-term borrowing. Additionally, I do not find any positive effect of IMF lending on countries’ ability to tap international capital markets. These results helps explain why a catalytic effect of IMF lending has proved empirically elusive

Keywords: Sovereign debt; maturity; IMF; official support (search for similar items in EconPapers)
JEL-codes: C33 F33 F34 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-09
New Economics Papers: this item is included in nep-fmk and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /12/Fich/dt1231e.pdf First version, September 2011 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1231

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