Dealing with Country Diversity: Challenges for the IMF Credit Union Model

43 Pages Posted: 12 Oct 2008

See all articles by Gregor Irwin

Gregor Irwin

Bank of England

Adrian Penalver

Bank of England

Chris Salmon

Bank of England

Ashley Taylor

affiliation not provided to SSRN

Date Written: May 1, 2008

Abstract

We develop a model in which countries can protect themselves against shocks by subscribing to a credit union that shares the key features of the International Monetary Fund, or by self-insuring through accumulating reserves. We assess the impact of the increasing heterogeneity of the Fund's membership on the political equilibrium Fund size and hence its effectiveness as a credit union. We find the Fund's existing lending framework is well suited to a world in which its members have homogeneous interests, but as the membership has become more heterogeneous the Fund is increasingly unlikely to provide financing on a sufficient scale to meet the demands of higher-risk members, leading them to rely more heavily on self-insurance. We conclude that the framework governing the Fund's lending operations may no longer be appropriate.

JEL Classification: F33, F34

Suggested Citation

Irwin, Gregor and Penalver, Adrian and Salmon, Chris and Taylor, Ashley, Dealing with Country Diversity: Challenges for the IMF Credit Union Model (May 1, 2008). Bank of England Working Paper No. 349, Available at SSRN: https://ssrn.com/abstract=1280823 or http://dx.doi.org/10.2139/ssrn.1280823

Gregor Irwin (Contact Author)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Adrian Penalver

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Chris Salmon

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Ashley Taylor

affiliation not provided to SSRN ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
46
Abstract Views
925
PlumX Metrics