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Once Bitten: The Effect of IMF Programs on Subsequent Reserve Behavior

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  • Graham Bird
  • Alex Mandilaras

Abstract

Traditional models have encountered problems in explaining the ac- cumulation of international reserves, particularly in Asia, in the period since the late 1990s. One suggestion has been that countries have sought to self insure against future crises, either because of a perceived increase in the cost of crises or because of the perceived conditionality costs of using IMF credits. This paper others an empirical investigation of these ideas, disaggregating across regions and across IMF facilities. Using both static and dynamic regression techniques we find that IMF pro- grams have had a significant positive effect on subsequent reserve accu- mulation, allowing for other determinants, and that this effect endures over time. We also find that the effect differs between Latin America and Asia, and that it is not simply a phenomenon that is associated with the Asian crisis of 1997/98. The paper goes on to discuss the implications for the design of policy and for the reform of the IMF.
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  • Graham Bird & Alex Mandilaras, 2011. "Once Bitten: The Effect of IMF Programs on Subsequent Reserve Behavior," Review of Development Economics, Wiley Blackwell, vol. 15(2), pages 264-278, May.
    • Handle: RePEc:bla:rdevec:v:15:y:2011:i:2:p:264-278
    DOI: j.1467-9361.2011.00607.x
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    Cited by:

    1. Joseph Joyce & Raul Razo-Garcia, 2011. "Reserves, quotas and the demand for international liquidity," The Review of International Organizations, Springer, vol. 6(3), pages 393-413, September.
    2. Scheubel, Beatrice & Stracca, Livio, 2019. "What do we know about the global financial safety net? A new comprehensive data set," Journal of International Money and Finance, Elsevier, vol. 99(C).
    3. Steiner, Andreas, 2013. "How central banks prepare for financial crises – An empirical analysis of the effects of crises and globalisation on international reserves," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 208-234.
    4. ., 2016. "Introduction and overview: the purposes and operations of the IMF," Chapters, in: The International Monetary Fund, chapter 1, pages 1-18, Edward Elgar Publishing.
    5. Andone, Irina & Scheubel, Beatrice, 2019. "Once bitten: new evidence on the link between IMF conditionality and IMF stigma," Working Paper Series 2262, European Central Bank.
    6. Stracca, Livio & Scheubel, Beatrice, 2016. "What do we know about the global financial safety net? Rationale, data and possible evolution," Occasional Paper Series 177, European Central Bank.
    7. Scheubel, Beatrice & Stracca, Livio & Tille, Cédric, 2019. "Taming the global financial cycle: What role for the global financial safety net?," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 160-182.
    8. Irina Andone & Beatrice D. Scheubel, 2017. "Memorable Encounters? Own and Neighbours' Experience with IMF Conditionality and IMF Stigma," CESifo Working Paper Series 6399, CESifo.

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    • F3 - International Economics - - International Finance

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