International Bailouts, Moral Hazard, and Conditionality

29 Pages Posted: 9 Oct 2001

See all articles by Olivier Jeanne

Olivier Jeanne

International Monetary Fund (IMF) - Research Department; Ecole Nationale des Ponts et Chaussees (ENPC); Centre for Economic Policy Research (CEPR)

Jeromin Zettelmeyer

Bruegel; CEPR

Date Written: September 2001

Abstract

The large international bailouts of the 1990s have been criticized for different reasons, in particular for generating moral hazard at the expense of the global taxpayer. We argue in this paper that some of these concerns are exaggerated or misleading because international bailouts have no or very little cost to the international community and the global taxpayer. The problem, in our view, is rather to ensure that the international safety net is not used as an input into bad domestic policies. This may require a shift towards ex ante conditionality, in the sense that the availability and size of official crisis lending need to be conditional on government policies before the crisis.

JEL Classification: F32, F33

Suggested Citation

Jeanne, Olivier and Zettelmeyer, Jeromin, International Bailouts, Moral Hazard, and Conditionality (September 2001). Available at SSRN: https://ssrn.com/abstract=284147 or http://dx.doi.org/10.2139/ssrn.284147

Olivier Jeanne (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

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Centre for Economic Policy Research (CEPR)

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Jeromin Zettelmeyer

Bruegel

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Belgium

HOME PAGE: http://https://www.bruegel.org/people/jeromin-zettelmeyer

CEPR ( email )

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