Clark, Peter B.; Huang, Haizhou - International Monetary Fund (IMF) - 2001
a lower IMF rate. Highly indebted countries hit by large negative shocks to output will default. The resulting reduction … further rounds of defaults. In this environment the IMF can limit default and internalize the externality generated by … contagion through its lending with conditionality. We characterize the IMF's optimal lending decision in mitigating the loss in …