Financial Crises Management By The IMF : Was External And Public Debt Sustainable ?

Ben Hassine, Hela (2015): Financial Crises Management By The IMF : Was External And Public Debt Sustainable ?

Abstract

The main contribution of this paper is to analyze whether the absence of restructuring programs during some financial crisis episodes was justified. In other words, was the countries' debt sustainable, allowing an intervention through only an IMF bailout ? Using a non- parametric methodology (Classification And Regression Tree or CART), the fiscal and the external solvency of countries facing financial troubles since the 80’s was assessed. It is found that, in some crisis episodes, like the one faced by Argentina in 1995, Brazil in 1999 and Turkey in 2001, a debt restructuring plan was necessary while the countries clearly exhibited solvency problems. This can explain the inefficiency of the IMF intervention during some crises.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial crises, sustainability assessment, IMF, Debt
• Subjects: F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems; F - International Economics > F3 - International Finance > F35 - Foreign Aid; G - Financial Economics > G0 - General > G01 - Financial Crises

References

Bagehot W. (1873), Lombard Street : A Description of the Money Market, London, Kegan, Paul & Co. Eds.

Barbku B. & Al (2012), “Financial crisis and the multilateral response: What the historical record shows”, Journal of International Economics, 422-435

CALVO, G. A. (1996), “Varieties of Capital-Market Crises”, forthcoming in The Debt Burden and its Consequences for Monetary Policy, G. Calvo and M. King (eds), London: MacMillan Press

DETRAGIACHE E. & SPILIMBERGO A. (2001), “Crises and Liquidity: Evidence and Interpretation”, IMF Working Paper 01/2, janvier

GABBI G., BOCCONI S., MATTHIAS M. & DE LERMA M. (2006), “CART analysis of qualitative variables to improve credit rating processes”, Society for Computational Economics, Series Computing in Economics and Finance N°179.

GEITHNER T. (2002), Assessing Sustainability, IMF, the Policy Development and Review Department, in consultation with the Fiscal Affairs, International Capital Markets, Monetary and Exchange Affairs, and Research Departments

GUIDOTTI P., STURZENEGGER F. & VILLAR A. (2004), On the Consequences of Sudden Stops, Economía, Vol. 4, N° 2, 171–203

HUNG C. & CHEN J. (2009), “A selective ensemble based on expected probabilities for bankruptcy prediction”, Expert Systems with Applications, Volume 36, N° 3, Part 1, avril, 5297-5303.

INTERNATIONAL MONETRAY FUND (2000), « Debt and Reserve Related Indicators of External Vulnerability », SM/00/65 (23/03/2000)

INTERNATIONAL MONETRAY FUND (2009), IMF Report N° 09/329 , December

ISCANOGLU A., WEBER G. & TAYLAN P. (2007), “Predicting Default Probabilities with Generalized Additive Models for Emerging Markets”, Graduate Summer School on New Advances in Statistics, METU, août 11-24.

Kaminsky G. et Reinhart C. (1999), “The Twin Crises: The Causes of Banking and Balance-of-Payments Problems”, International Finance Discussion Papers Number 544, March

KAMINSKY G. (2006), “Currency crises: Are they all the same?”, Journal of International Money and Finance 25, 503-527.

KIM J. (2008), “Sudden Stops and Optimal Self-Insurance”, IMF Working Paper 08/144, juin.

KOČENDA E. & VOJTEK M. (2009), “Default Predictors and Credit Scoring Models for Retail Banking”, CESIFO Working Paper N° 2862, décembre.

KRUGMAN P. (1979), “A Model of Balance Of Payments Crises”, Journal of Money, Credit and Banking, Volume 11, N° 3, août, 311- 325

MANASSE P., ROUBINI N. & SCHIMMELPFENNIG A. (2003), Predicting Sovereign Debt Crises, IMF Working Paper 03/221.

SACHS J., TORNELL A. & VELASCO A. (1996), “Financial Crises in Emerging Markets: The Lessons From 1995”, NBER WP 5576, mai

SKALA M., THIMANN C. & WÖLFINGER R. (2007), “The Search For Columbus’ EGG: Finding A New Formula To Determine Quotas At The IMF”, European central bank OCCASIONAL PAPER SERIES NO 70, août.

WILLET T. Nitithanprapas E., & Rongala S. (2004), “The Asian Crises Re-examined”, Asian Economic Papers, Vol. 3, septembre, 32-87.

WILLIAMS M., DE SILVA H., KOEHN M. & ORNSTEIN S. (1990), “Why did so many savings and loans go bankrupt?”, Economics Letters Volume 36, N° 1, mai, 61-66.