IMF Lending in an Interconnected World

By Jean-Guillaume Poulain, Julien Reynaud

July 10, 2017

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Jean-Guillaume Poulain, and Julien Reynaud. IMF Lending in an Interconnected World, (USA: International Monetary Fund, 2017) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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 lending cycles. Second, using a panel of 91 advanced, emerging, and frontier economies over 1992-2014, we show that global factors and interconnectedness, as proxied by a countries’ potential exposure to economic spillovers from trade partners, together with more traditional idiosyncratic factors, have a significant impact on the probability that a member country obtains financial assistance from the IMF. Our results are robust to various robustness checks. The approach presented in this paper can be used to assess future demand for IMF financial assistance.

Subject: Balance of payments, Current account deficits, Financial contagion, Financial crises, Financial sector policy and analysis, Oil prices, Prices, Spillovers

Keywords: Current account deficits, Financial contagion, Financial crisis, Fund support, GDP, GDP variation, Global, Global financial cycle, IMF agreement, IMF arrangement, IMF lending, IMF lending cycle, Interconnectedness, Lending, Oil prices, Spillovers, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/155
Stock No:

WPIEA2017155
ISBN:

9781484305867
ISSN:

1018-5941

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