This paper explores empirically how the adoption of IMF programs affects sovereign risk over the medium term. We find that IMF programs significantly increase the probability of subsequent sovereign defaults by approximately 1.5–2 percentage points. These results cannot be attributed to...

We investigate whether the fact that most countries cannot borrow internationally in their own currencies, referred to as “original sin” by Eichengreen and Hausmann (1999), may remain as a “mystery” when an alternative variable set and estimation procedure are taken into account. Our...

This paper explores empirically how the adoption of IMF programs affects sovereign risk over the medium term. We nd that IMF programs signifcantly increase the probability of subsequent sovereign defaults by approximately 1.5 to 2 percentage points. These results cannot be attributed to...

We analyze the determinants of IMF lending since the early nineties, a period during which the roles of financial cycles and interconnectedness as amplifiers and transmitters of economic crises have gained prominence. First, we show that the global financial cycle is an important driver of IMF...

The traditional approach to international finance is to view capital flows as the financial counterpart to savings and investment decisions, assuming further that the GDP boundary defines both the decision-making unit and the currency area. This "triple coincidence" of GDP area, decision-making...

The present international financial architecture (IFA) has been weakening since the early 2010s. Several factors have hindered the reorganization of the current IFA, accelerated the bipolarization of international financial relations, and reshaped the balance of power between sovereign debtors...

Using panel data for 106 countries in 1971-1997, we estimate generalized least squares regressions to explain IMF lending as well as monetary and fiscal policies in the recipient countries. With respect to moral hazard, we find that a country's rate of monetary expansion and its government...

Frequently, parties make sequential decisions regarding investments for which the probability of success or failure is dependent upon the amount of total investment. This paper reports a series of experiments involving a costly investment game which is derived from the catalytic finance model of...

Previous tests of creditor moral hazard cannot distinguish between two types of investor behavior: expectations of implicit guarantees or better future economic fundamentals due to a prospective IMF program. The novelty of our approach lies in the inclusion of the forward foreign exchange rate...

In response to debt crises, policy makers often feature Collective Action Clauses (CACs) in sovereign bonds among the pillars of international financial architecture. However, the content of official pronouncements about CACs suggests that CACs are more like doorknobs: a process tool with...