Country Insurance

August 1, 2004

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Format: Chicago

Eduardo Levy Yeyati, and Tito Cordella. Country Insurance, (USA: International Monetary Fund, 2004) accessed November 21, 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

In this paper, we examine how the presence of country insurance schemes affects policymakers' incentives to undertake reforms. Such schemes (especially when made contingent on negative external shocks) are more likely to foster than to delay reform in crisis-prone volatile economies. The consequences of country insurance, however, hinge on the nature of the reforms being considered: "buffering" reforms, aimed at mitigating the cost of crises, could be partially substituted for, and ultimately discouraged by, insurance. By contrast, "enhancing" reforms that pay off more generously in the absence of a crisis are likely to be promoted.

Subject: Financial crises, Insurance, Moral hazard, Solvency, Tax incentives

Keywords: Country insurance, Reform effort, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/148
Stock No:

WPIEA1482004
ISBN:

9781451856859
ISSN:

1018-5941

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