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A cure worse than the disease? Currency crises and the output costs of IMF-supported stabilization programs

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  • A cure worse than the disease? Currency crises and the output costs of IMF-supported stabilization programs
  • Hutchison, Michael M.
  • National Bureau of Economic Research


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Title A cure worse than the disease? Currency crises and the output costs of IMF-supported stabilization programs
Similar Titles
Material Type Reports
Author(English)

Hutchison, Michael M.

Publisher

Cambridge:National Bureau of Economic Research

Date 2001-05
Series Title; No NBER Working Paper Series / 8305
Pages 53
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Original Format pdf
Subject Economy < Financial Policy
Holding National Bureau of Economic Research

Abstract

This paper investigates the output effects of IMF-supported stabilization programs, especially those introduced at the time of a severe balance of payments/currency crisis. Using a panel data set over the 1975-97 period and covering 67 developing and emerging-market economies (with 461 IMF stabilization programs and 160 currency crises), we find that currency crises even after controlling for macroeconomic developments, political and regional factors significantly reduce output growth for 1-2 years. Output growth is also lower (0.7 percentage points annually) during IMF-stabilization programs, but it appears that growth generally slows prior to implementation of the program. Moreover, programs coinciding with recent balance of payments or currency crises do not appear to further damage short-run growth prospects. Countries participating in IMF programs significantly reduce domestic credit growth, but no effect is found on budget policy. (The rest omitted)