IMF Programs and Financial Flows to Offshore Centers

May 26, 2021

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Shekhar Aiyar, and Manasa Patnam. IMF Programs and Financial Flows to Offshore Centers, (USA: International Monetary Fund, 2021) 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

This paper examines whether IMF lending is associated with increases in outflows to offshore financial centers (OFCs), known for bank secrecy and asset protection, relative to other international destinations. Using quarterly data from the BIS on bilateral bank deposits, we are unable to detect any positive and statistically significant effect of IMF loan disbursements on bank deposits in OFCs. The result holds even after restricting the sample to the duration of the IMF program, where disbursement quarters and non-disbursement quarters should be subject to similar degrees of macroeconomic stress. It is also robust to using the scheduled tranche of disbursements as an instrument for actual disbursements. While the effects vary by the type and conditionality of the IMF program, as well as the amount of lending, none of the effects are found to be positive and statistically significant. We also estimate whether the recent surge in emergency lending, during the Covid-19 crisis, is associated with an increase in outflows to OFCs but find no evidence to support this.

Subject: Bank credit, Corruption, Crime, Financial institutions, Financial services, Foreign aid, Loans, Money, Offshore financial centers

Keywords: Bank credit, Corruption, Disbursement quarter, Global, IMF aid disbursement, IMF disbursement, IMF emergency lending, IMF loan disbursement, IMF loan tranche, Loans, Offshore financial centers

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/146
Stock No:

WPIEA2021146
ISBN:

9781513573540
ISSN:

1018-5941

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