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Article: IMF Financing and Moral Hazard.(International Monetary Fund)
- Article from:
- Finance & Development
- Article date:
- June 1, 2001
- Author:
CopyrightCOPYRIGHT 2001 International Monetary Fund. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Although it has been argued that IMF financing may create moral hazard, it is not easy to find clear evidence of such an effect. If the extent of IMF-included moral hazard were known, any costs would have to be weighed against the possible benefits of IMF financing.
"MORAL HAZARD" is a term frequently heard in recent debates over the reform of international financial institutions. In other words, critics argue that the knowledge that IMP financing will be made available in the event of a financial crisis makes the crisis more likely to occur. The idea is that creditors know that IMP financing helps crisis-prone countries stave off default and are therefore willing ...