A Model of the Imf as a Coinsurance Arrangement
43 Pages Posted: 18 Dec 2010
There are 4 versions of this paper
A Model of the IMF as a Coinsurance Arrangement
A Model of the IMF as a Coinsurance Arrangement
A Model of the Imf as a Coinsurance Arrangement
A Model of the Imf as a Coinsurance Arrangement
Date Written: 2008
Abstract
The paper shows that an IMF-like coinsurance arrangement among countries can play a useful role in the global financial system. The operation of the coinsurance arrangement is examined under different loan contracts. It shows that, if the IMF?s objective is to safeguard its resources and be concerned about the welfare of the borrower, an ex ante loan contract is more likely to create the right incentives than an ex post loan contract. Such contracts highlight the need for precommitment to contend with the Samaritan?s dilemma and time inconsistency, and state-contingent repayment schemes to deal with King Lear?s dilemma. --
Keywords: IMF, coinsurance arrangement, moral hazard, Samaritan?s dilemma, King Lear?s dilemma
JEL Classification: D82, F02, F33, G22
Suggested Citation: Suggested Citation
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