Catalytic Finance: When Does it Work?
21 Pages Posted: 26 Feb 2003
Date Written: February 2003
Abstract
In a simple model of currency crises caused by creditor coordination failure, we show that bailouts that reduce ex post inefficiency will sometimes create ex ante moral hazard but will sometimes enhance the incentives for governments to take preventative actions. This model helps us understand a debate about the role of the IMF in catalyzing lending to developing countries.
Keywords: Moral Hazard, Financial Crisis, International Financial Architecture, Global Games
JEL Classification: C72, D82, F33
Suggested Citation: Suggested Citation
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