We are grateful to Rich Kelly for data and guidance on Fund programmes and to Marco Arena, Roger Betancourt, Graham Bird, Michael Bordo, Jim Boughton, Fernando Broner, Patrick Conway, Barry Eichengreen, Kristin Forbes, Federico Guerrero, Enrique Mendoza, Alessandro Rebucci, Carmen Reinhart, John Shea, Antonio Spilimbergo, Jeromin Zettlemeyer, seminar participants at the University of Maryland and three anonymous referees for helpful comments and suggestions. The views expressed in this article are those of the authors and should not be attributed to the International Monetary Fund.
Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices?*
Article first published online: 11 JUL 2006
The Economic Journal
Volume 116, Issue 513, pages 843–867, July 2006
How to Cite
Mody, A. and Saravia, D. (2006), Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices?. The Economic Journal, 116: 843–867. doi: 10.1111/j.1468-0297.2006.01114.x
- Issue published online: 11 JUL 2006
- Article first published online: 11 JUL 2006
- Submitted: 14 October 2003 Accepted: 6 April 2005
In this article, we examine whether IMF programmes influence the ability of developing country issuers to tap international bond markets and if they improve spreads paid on the bonds issued. We find that Fund programmes do not provide a uniformly favourable signalling effect. Instead, the evidence is most consistent with a positive effect of IMF programmes when they are viewed as likely to lead to policy reform and when undertaken before economic fundamentals have deteriorated significantly. The size of the Fund's programme matters but the credibility of a joint commitment by the country and the IMF appears to be critical.