A (New) Country Insurance Facility

January 1, 2005

Preview Citation

Format: Chicago

Tito Cordella, and Eduardo Levy Yeyati. A (New) Country Insurance Facility, (USA: International Monetary Fund, 2005) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

To cope with the self-fulfilling liquidity runs that triggered many recent financial crises, we propose the creation of a country insurance facility. The facility, which we envisage as complementary to the existing multilateral lending facilities, would provide eligible countries with automatic access to a credit line at a predetermined interest rate. Eligibility criteria should be easily verifiable, focus on debt sustainability, and take into account the currency and maturity composition of the debt. Other critical design issues considered here include the size of the facility, its duration and charges, and the exit costs for a country that loses eligibility.

Subject: Budget planning and preparation, Financial crises, Insurance, Liquidity, Public debt

Keywords: CIF loan, Credit line, IMF facilities, Liquidity run, Risk premium, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/023
Stock No:

WPIEA2005023
ISBN:

9781451860429
ISSN:

1018-5941

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