Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending

Curzio Giannini and Carlo Cottarelli

No 2002/193, IMF Working Papers from International Monetary Fund

Abstract: During the 1990s, the concept of "catalytic official finance" (COF) gained prominence in policy debates. The concept revolves around the idea that the propensity of investors to lend to a country increases when the IMF provides its "seal of approval"-backed up by only limited official financing-on the country's economic program. COF aims at avoiding, on the one hand, the massive use of public money to bail out private investors; on the other, the recourse to coercive bailing-in mechanisms. The paper concludes that COF, while possibly useful in other contexts, is less reliable when used to manage capital account crises.

Keywords: WP; IMF program; IMF lending; program country; IMF resource; IMF-supported program; International Monetary Fund; Lender of Last Resort; Capital Account Crises Contents; IMF seal of approval; IMF activity; financial support; IMF parlance; IMF role; current account; IMF historian; seal of approval; IMF spring meeting; Capital inflows; Capital account crisis; Current account; Crisis management; Europe (search for similar items in EconPapers)
Pages: 50
Date: 2002-11-01
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Citations: View citations in EconPapers (72)

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