IMF programs are often considered to carry a "stigma" that triggers adverse market reactions. We show that such a negative IMF effect disappears when accounting for endogenous selection into programs. To proxy for a country's access to financial markets, we use credit ratings and investor...

We focus on the role that the transmission of information between a multilateral (the IMF) and a country has for the optimal design of conditional reforms. Our model predicts that when agency problems are especially severe, and/or IMF information is valuable, a centralized control is indeed...

The large international bailouts of the 1990s have been criticized for differentreasons, in particular for generating moral hazard at the expense of theglobal taxpayer. We argue in this paper that some of these concerns areexaggerated or misleading because international bailouts have no or...

Since the breakdown of the Bretton Woods System diverging current account positions in Europe have prevailed. While the Southern and Western European countries have tended to run current account deficits, the current accounts of the Central and Northern European countries, in particular Germany,...

The recent increase of interest rate spreads in Europe and their apparent detachment from underlying fundamental variables has generated a debate on multiple equilibria in the sovereign bond market (see De Grauwe and Ji (2012)). We critically evaluate this hypothesis, by pointing towards an...

The recent increase of interest rate spreads in Europe and their apparent detachment from underlying fundamental variables has generated a debate on multiple equilibria in the sovereign bond market (see De Grauwe and Ji (2012)). We critically evaluate this hypothesis, by pointing towards an...

I analyze the optimal design of banking supervision in the presence of cross-border lending. Cross-border lending could imply that an individual bank failure in one country could trigger negative spillover effects in another country. Such cross-border contagion effects could turn out to be...

In 1998 Rüdiger Dornbusch gave the Munich Lectures in Economics entitled International Financial Crises . The CES Academic Council awarded him the prize and title Distinguished CES Fellow for his outstanding work on the monetary theory of foreign trade.Rüdiger Dornbusch passed away on July 25,...

This paper develops a dynamic two-country neoclassical stochastic growth model with incomplete markets. Short-term credit flows can be excessive and reverse suddenly. The equilibrium outcome is constrained inefficient due to pecuniary externalities. First, an undercapitalized country borrows too...

We test whether, in addition to economic conditions, IMF credit is influenced by political factors. On the basis of a panel model for 128 countries over the period 1972-1998, we find that debt service scaled to exports, international reserve holdings scaled to imports and economic growth, as...