Fund-Supported Programs and Crisis Prevention
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Summary:
This paper examines the theoretical foundations for, and empirical evidence of, Fund support in preventing capital account crises. At a theoretical level, Fund supported programs can lower the crisis probability in two ways. First, such programs provide the member with additional external reserves, making a run for the exit by private creditors less likely. Second, such programs induce and signal better economic policies, though this needs to be supported by conditionality.
Series:
Policy Papers
Subject:
Balance of payments Conditionality Crisis prevention Exchange rate policy surveillance Fund-supported adjustment programs
English
Publication Date:
March 23, 2006
Format:
Paper
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