The Role of IMF Arrangements in Restoring Access to International Capital Markets
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
Using a database of emerging market fundamentals and bond index spreads across 56 frontier and emerging market countries rated below investment grade during the period 2002-22, we assess whether IMF arrangements can restore access to international capital markets (ICM) for countries in distress through liquidity and conditionality channels. We find that global financial conditions and debt/GDP are the most important determinants of access to ICM within the horizon of a typical IMF arrangement. Using an event study methodology, we show that spreads increase prior to the start of an IMF arrangement and then decrease gradually. By exploiting different characteristics of IMF arrangements, we find evidence that the reforms implemented under the IMF arrangement, as measured by rounds of successful IMF reviews, matter more in the medium term than the IMF’s role as a liquidity provider. These results are consistent with our analysis of 55 credit rating upgrades to ICM access levels, which suggests that debt reduction plays the largest role and that IMF arrangements lend credibility to reforms.
Series:
Working Paper No. 2024/173
Subject:
Bonds Credit ratings Debt sustainability Emerging and frontier financial markets External debt Financial institutions Financial markets International capital markets Money Public debt
Frequency:
regular
English
Publication Date:
August 9, 2024
ISBN/ISSN:
9798400284021/1018-5941
Stock No:
WPIEA2024173
Format:
Paper
Pages:
45
Please address any questions about this title to publications@imf.org