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Stigma? What stigma? A contribution to the debate on financial market effects of IMF lending

Beatrice Scheubel, Andrea Tafuro and Benjamin Vonessen

No 2198, Working Paper Series from European Central Bank

Abstract: In the policy debate on the effectiveness of the Global Financial Safety Net, concerns have been raised that expectations of adverse effects of IMF programmes may deter countries from asking for an IMF programme when they need one, a form of ‘IMF stigma’. We explore the existence of IMF financial market stigma using monthly data by estimating how and to which extent adverse market reactions to a programme materialise and how past experience with adverse market reactions affects subsequent IMF programme participation. Our results, derived with event history techniques and propensity score matching, indicate no role for ‘IMF stigma’ stemming from the fear of adverse market movements. Instead, we find evidence of ‘IMF recidivism’ driven by adverse selection and IMF conditionality. JEL Classification: E02, F32, F33, F34

Keywords: Asian crisis; capital flows; Global Financial Safety Net; IMF conditionality; IMF recidivism; treasury bill rates (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-opm
Date: 2018-11
Note: 2025627
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