@article{IMF-Supported:1421,
      recid = {1421},
      author = {De Resende, Carlos},
      title = {IMF-Supported Adjustment Programs: Welfare Implications  and the Catalytic Effect},
      publisher = {Bank of Canada},
      address = {2007},
      pages = {1 online resource (iv, 36 pages)},
      abstract = {The author studies the welfare implications of adjustment  programs supported by the International Monetary Fund  (IMF). He uses a model where an endogenous borrowing  constraint, set up by international lenders who will never  lend more than a debt ceiling, forces the borrowing economy  to always choose repayment over default. The immediate  potential welfare cost of joining a program is driven by  IMF conditionality: to be able to borrow from the IMF, the  country has to submit to limits on the consumption of  public goods. The benefits derive from the additional  borrowing from the IMF (at a lower interest rate) and/or  through a "catalytic effect" on private loans, which  facilitates consumption smoothing over time. Simulations of  the dynamic model in two institutional environments – with  and without the IMF – are compared. Results indicate that  when conditionality forces the country to save more, at a  cost that does not prevent it from joining an IMF program,  the resulting lower probability of default can induce  private lenders to relax their borrowing constraints. Based  on a calibration of the model for the Brazilian economy,  the overall welfare gains associated with IMF programs are  relatively small.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/1421},
      doi = {https://doi.org/10.34989/swp-2007-22},
}