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Abstract

International Monetary Fund (IMF)-supported programmes catalyse private capital to non-defaulting countries. We find the IMF to be effective in stimulating private capital flows to middle-income countries that participate in a Fund programme, but do not restructure their debt. IMF-supported programmes help non-defaulting countries to signal their willingness to reform and repay debts, thereby catalysing private capital. This signalling role appears to be more important for Fund catalysis, than the size of IMF lending.