Working Paper: NBER ID: w7701
Authors: Michael D. Bordo; Anna J. Schwartz
Abstract: In this paper we first trace the changing nature of banking, currency and debt crises from the last century to the present. Each type of crisis has transmogrified in the presence of official intervention and the creation of a safety net. A similar pattern is observed for international rescue loans. We then present evidence suggesting that the incidence has increased and the severity of financial crises has changed little in emerging markets from the pre-1914 era to the present. Finally we assess the impact of IMF loans on the macro performance of the recipients. A simple with-without comparison of countries receiving IMF assistance during crises in the period 1973-98 with countries in the same region not receiving assistance suggests that the real performance of the former group was possibly worse than the latter. Similar results obtain adjusting for self-selection bias and counterfactual policies.
Keywords: bailouts; rescue loans; financial crises; IMF assistance
JEL Codes: F3; G2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Countries receiving IMF assistance during crises (1973-1998) (F35) | Worse real performance (D29) |
| IMF loans (F34) | Poorer economic outcomes (F69) |
| Government competence and political stability (H11) | Observed outcomes (C90) |
| International lending (F34) | Severity of crises (H12) |