Does IMF Financing Result in Moral Hazard?

The view that the IMF’s financial support gives rise to moral hazard has become increasingly prominent in policy discussions, particularly following the 1995 Mexican crisis. This paper seeks to clarify a number of conceptual issues and bring some basic empirical evidence to bear on this hypothesis. While some element of moral hazard is a logical consequence of the IMF’s financial support, such moral hazard is difficult to detect in market reactions to various IMF policy announcements and there is no evidence that such moral hazard has recently been on the rise.Fund;Moral hazard;bond, bonds, bond spreads, liquidity support, debt service, bond spread, international capital flows, capital markets, market bond, international capital, liquidity crisis, private investors, bond index, bond prices, financial resources, capital flows, financial markets, access to capital markets, bondholders, financial institutions, bond markets, international finance, financial market, treasury bonds, international financial architecture, domestic-currency, international reserves, net present value, present value, emerging market bond, international financial statistics, current account deficit, bond holders