Discussion Paper

No. 2007-26 | July 09, 2007
A Model of the IMF as a Coinsurance Arrangement

Abstract

The paper shows that an IMF-like coinsurance arrangement among countries can play a useful role in the global financial system. The operation of the coinsurance arrangement is examined under different loan contracts. It shows that, if the IMF´s objective is to safeguard its resources and be concerned about the welfare of the borrower, an ex ante loan contract is more likely to create the right incentives than an ex post loan contract. Such contracts highlight the need for precommitment to contend with the Samaritan´s dilemma and time inconsistency, and state-contingent repayment schemes to deal with King Lear´s dilemma. 

Paper submitted to the special issue "Recent Developments in International Money and Finance" edited by Ronald MacDonald

JEL Classification

D82 F02 F33 G22

Cite As

Ralph Chami, Sunil Sharma, and Ilhyock Shim (2007). A Model of the IMF as a Coinsurance Arrangement. Economics Discussion Papers, No 2007-26, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2007-26

Assessment



Comments and Questions


Anonymous - Referee Report
September 27, 2007 - 10:16

see attached file


Ilhyock Shim - Reply to Referee Report
December 05, 2007 - 11:09

see attached file


Anonymous - Referee Report
October 08, 2007 - 11:09

see attached file


Ilhyock Shim - Reply to Referee Report
December 05, 2007 - 11:10

see attached file