Does IMF Financing Result in Moral Hazard?

38 Pages Posted: 2 Feb 2006

See all articles by Timothy Lane

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department

Steven Phillips

International Monetary Fund (IMF) - Western Hemisphere Department

Date Written: October 2000

Abstract

The view that the IMF`s financial support gives rise to moral hazard has become increasingly prominent in policy discussions, particularly following the 1995 Mexican crisis. This paper seeks to clarify a number of conceptual issues and bring some basic empirical evidence to bear on this hypothesis. While some element of moral hazard is a logical consequence of the IMF`s financial support, such moral hazard is difficult to detect in market reactions to various IMF policy announcements and there is no evidence that such moral hazard has recently been on the rise.

Keywords: IMF moral hazard

JEL Classification: F3 (International Finance)

Suggested Citation

Lane, Timothy and Phillips, Steven, Does IMF Financing Result in Moral Hazard? (October 2000). IMF Working Paper, Vol. , pp. 1-39, 2000. Available at SSRN: https://ssrn.com/abstract=880201

Timothy Lane (Contact Author)

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-7648 (Phone)
202-623-4405 (Fax)

Steven Phillips

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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