Working Paper: NBER ID: w11198
Authors: Barry Eichengreen; Kenneth Kletzer; Ashoka Mody
Abstract: The IMF attempts to stabilize private capital flows to emerging markets by providing public monitoring and emergency finance. In analyzing its role we contrast cases where banks and bondholders do the lending. Banks have a natural advantage in monitoring and creditor coordination, while bonds have superior risk sharing characteristics. Consistent with this assumption, banks reduce spreads as they obtain more information through repeat transactions with borrowers. By comparison, repeat borrowing has little influence in bond markets, where publicly-available information dominates. But spreads on bonds are lower when they are issued in conjunction with IMF-supported programs, as if the existence of a program conveyed positive information to bondholders. The influence of IMF monitoring in bond markets is especially pronounced for countries vulnerable to liquidity crises.
Keywords: No keywords provided
JEL Codes: F0; F2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| IMF programs (F33) | bond issuance (H74) |
| IMF programs (F33) | spreads on syndicated loans (F65) |
| repeat borrowing (G51) | spreads on syndicated loans (F65) |
| IMF programs (F33) | access to borrowing (G21) |
| IMF programs (F33) | spreads (Y60) |
| IMF presence (F33) | borrowing likelihood for loans and bonds (G12) |
| IMF programs (F33) | lower spreads in medium-debt countries (F34) |
| debt levels (H63) | impact of IMF presence (F69) |