Global Contagion and IMF Credit Cycles: A Lender of Partial Resort?

Stephen Kaplan and Sujeong Shim
Additional contact information
Stephen Kaplan: George Washington University

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: The International Monetary Fund (IMF) has an incomplete governance architecture characterized by insufficient resources to fulfill its global financial stability mandate. We argue this institutional incompleteness influences how the IMF balances tensions between systemic risks and moral hazard, and when it surprisingly exits lending relationships. During high global contagion periods, the IMF targets stabilizing systemic risks to fulfill its mandate, granting large loans and overlooking non-compliance with conditionality. However, when the IMF perceives minimal contagion risk, it focuses on moral hazard, extending smaller loans with stricter conditionality, and willingly cuts financial ties to preserve its reputation and resources for future crises. Employing a comparative case analysis of IMF decision-making for Argentina (1998-2001) and Greece (2010-2015), we find evidence supporting our theoretical priors from content analysis of IMF executive board meeting minutes, complementary archival evidence, and field research interviews. These findings have important implications for the IMF, institutionalism, and development.

Keywords: IMF; lender of last resort; financial crises; international financial risk; contagion risk; Argentina; Greece (search for similar items in EconPapers)
JEL-codes: F21 F33 F34 F42 F49 F50 F55 F60 F65 O1 O16 O19 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2021
New Economics Papers: this item is included in nep-fdg and nep-isf
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www2.gwu.edu/~iiep/assets/docs/papers/2021WP/KaplanIIEP2021-13.pdf (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:gwi:wpaper:2021-13

Access Statistics for this paper

More papers in Working Papers from The George Washington University, Institute for International Economic Policy Contact information at EDIRC.
Bibliographic data for series maintained by Kyle Renner ().