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

Peter G. Peterson Institute for International Economics; 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). CESifo Working Paper Series No. 563. Available at SSRN: https://ssrn.com/abstract=284147

Olivier Jeanne (Contact Author)

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

700 19th Street NW
Room 10-548L
Washington, DC 20431
United States
202-623-4272 (Phone)
202-623-6334 (Fax)

Ecole Nationale des Ponts et Chaussees (ENPC) ( email )

28 rue des Saints-Pres
75007 Paris
France
+33 1 44 58 28 76 (Phone)
+33 1 44 58 28 80 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jeromin Zettelmeyer

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

CEPR ( email )

London
United Kingdom

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