The Impact of Bailouts on the Probability of Sovereign Debt Crises: Evidence from IMF-Supported Programs
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Summary:
This paper studies the role of IMF-supported programs in mitigating the likelihood of subsequent sovereign defaults in borrowing countries. Using a panel of 106 developing countries from 1970 to 2016 and an entropy balancing methodology, we find that IMF-supported programs significantly reduce the likelihood of subsequent sovereign defaults. This finding is robust to different specifications of the entropy balancing and alternative identification strategies. Our results suggest that a country that signs a program with the IMF, typically experiences a slight improvement in its sovereign credit rating and a decrease in both government debt-to-GDP and fiscal deficit-to-GDP.
Series:
Working Paper No. 2019/002
Subject:
Credit ratings Debt default Econometric analysis Estimation techniques External debt Financial crises Money Public debt
English
Publication Date:
January 11, 2019
ISBN/ISSN:
9781484393413/1018-5941
Stock No:
WPIEA2019002
Pages:
38
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