We study how debt limits can be expansionary in economies facing sovereign risk. We develop a sovereign debt model with capital accumulation, long-term debt, and fiscal rules that features two distortions: debt dilution and a pecuniary externality of private investment on spreads. The optimal...

Since their inception at the end of the Second World War, the sister organizations of the World Bank and the International Monetary Fund (IMF) have aimed to consistently speak with one voice vis-agrave;-vis their member governments. However, anecdotal evidence suggests that they often do not...

This paper examines the role of IMF-supported programs in crisis prevention; specifically, whether, conditional on an episode of intense market pressures, IMF financial support helps prevent a capital account crisis from developing and, if so, through what channels. In doing so, the paper...

Over the past 40 years, the International Monetary Fund (IMF) has played a central role in the sovereign debt restructuring process. If the COVID-19 pandemic leads to a significant wave of sovereign debt distress, this role will be closely scrutinized. The paper analyzes how IMF policies have...

Climate change poses three specific but interrelated policy challenges: climate change mitigation, climate change adaptation (which includes building up resilience) and managing transition risks. The International Monetary Fund (IMF) is a multilateral institution with global reach and...

This study presents an empirical analysis of individual expressions of confidence in the World Bank (WB) and the International Monetary Fund (IMF) using the World Values Survey-Wave 7 data. The main hypothesis tested is that confidence in each institution is positively associated with alignment...

I show that corporate debt accumulation during booms can explain increases in sovereign risk during stress periods. Using idiosyncratic shocks to large firms as instruments for aggregate corporate leverage, I show that rising corporate leverage during the period 2002-2007 causally increases...

Trade finance, particularly in the form of short-term letters of credit has received favourable capital treatment new Basel III rules. However, concerns have been expressed over the potential negative “unintended consequences” of the newly created leverage ratio for trade. This paper offers...

We assess the impact of the COVID-19 crisis on the financing capacity of the four major multilateral development banks (MDBs) specialized in sovereign lending (IBRD, ADB, IADB, AfDB), based on available capital buffers and while maintaining triple-A ratings. The capacity of MDBs to expand...

Trade finance, particularly in the form of short-term, self-liquidating letters of credit and the like, has received relatively favourable treatment regarding capital adequacy and liquidity under Basel III, the new international prudential framework. However, concerns have been expressed over...