Once Bitten: The Effect of IMF Programs on Subsequent Reserve Behaviour

Graham Bird and Alex (Alexandros) Mandilaras

No 509, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: Traditional models have encountered problems in explaining the ac- cumulation of international reserves, particularly in Asia, in the period since the late 1990s. One suggestion has been that countries have sought to self insure against future crises, either because of a perceived increase in the cost of crises or because of the perceived conditionality costs of using IMF credits. This paper others an empirical investigation of these ideas, disaggregating across regions and across IMF facilities. Using both static and dynamic regression techniques we find that IMF pro- grams have had a significant positive effect on subsequent reserve accu- mulation, allowing for other determinants, and that this effect endures over time. We also find that the effect differs between Latin America and Asia, and that it is not simply a phenomenon that is associated with the Asian crisis of 1997/98. The paper goes on to discuss the implications for the design of policy and for the reform of the IMF.

Keywords: International Reserves; IMF (search for similar items in EconPapers)
JEL-codes: F3 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-11
New Economics Papers: this item is included in nep-sea
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Journal Article: Once Bitten: The Effect of IMF Programs on Subsequent Reserve Behavior (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0509

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