IMF lending and creditor moral hazard
By: by Andrew G. Haldane and Jörg Scheibe.
Contributors: Scheibe, Jörg.; Bank of England.
Series: Working paper,; no. 216; Working paper (Bank of England : Online) ;; no.216.
Publisher: Bank of England
Published: 2004
Place of publication: London
Language: eng
Format: Electronic resource
Subjects: International Monetary Fund.; Moral hazard.
Description: "Existing empirical evidence on the effects of IMF intervention on debtor and creditor incentives - so-called moral hazard - is mixed. A new test of creditor moral hazard is developed which uses some new data and some more stringent identifying restrictions. The test examines the response of the market valuation of UK banks to IMF loan packages. It finds a significant positive response for UK banks, with abnormal returns of over 1% in a number of cases. These excess returns are greater, the larger is the IMF package and the larger is the size of the creditor banks' emerging market portfolio. This effect is significant even once the potentially welfare-enhancing effect of IMF loans in offsetting overpricing problems in international capital markets is controlled for. In short, concrete evidence is found of creditor-side moral hazard associated with IMF support"--Bank of England web site.
Notes: Includes bibliographical references.
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