TY - JOUR
T1 - The IMF in a world of private capital markets
AU - Eichengreen, Barry
AU - Kletzer, Kenneth
AU - Mody, Ashoka
N1 - Funding Information:
Although the financial support can still become available should the need arise.
PY - 2006/5
Y1 - 2006/5
N2 - In analyzing the IMF attempts to stabilize private capital flows, we contrast cases where banks and bondholders do the lending. Consistent with banks' natural advantage in monitoring, they reduce spreads as they obtain more information through repeat transactions with borrowers. By comparison, repeat borrowing has little influence in bond markets, where publicly-available information dominates. But spreads on bonds are lower when they are issued in conjunction with an IMF-supported program, as if the existence of a program conveys positive information to bondholders. The influence of IMF monitoring in bond markets is especially pronounced for countries vulnerable to liquidity crises.
AB - In analyzing the IMF attempts to stabilize private capital flows, we contrast cases where banks and bondholders do the lending. Consistent with banks' natural advantage in monitoring, they reduce spreads as they obtain more information through repeat transactions with borrowers. By comparison, repeat borrowing has little influence in bond markets, where publicly-available information dominates. But spreads on bonds are lower when they are issued in conjunction with an IMF-supported program, as if the existence of a program conveys positive information to bondholders. The influence of IMF monitoring in bond markets is especially pronounced for countries vulnerable to liquidity crises.
KW - Capital market access
KW - IMF programs
KW - Signaling
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U2 - 10.1016/j.jbankfin.2005.07.002
DO - 10.1016/j.jbankfin.2005.07.002
M3 - Article
AN - SCOPUS:33645901223
SN - 0378-4266
VL - 30
SP - 1335
EP - 1357
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 5
ER -