Fund-Supported Programs and Crisis Prevention

March 23, 2006

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Fund-Supported Programs and Crisis Prevention, (USA: International Monetary Fund, 0) accessed November 21, 2024

Summary

This paper examines the theoretical foundations for, and empirical evidence of, Fund support in preventing capital account crises. At a theoretical level, Fund supported programs can lower the crisis probability in two ways. First, such programs provide the member with additional external reserves, making a run for the exit by private creditors less likely. Second, such programs induce and signal better economic policies, though this needs to be supported by conditionality.

Subject: Balance of payments, Conditionality, Crisis prevention, Exchange rate policy surveillance, Fund-supported adjustment programs

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