Journal Article

No. 2008-14 | May 09, 2008
A Model of the IMF as a Coinsurance Arrangement PDF Icon

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.

JEL Classification

D82 F02 F33 G22

Citation

Ralph Chami, Sunil Sharma, and Ilhyock Shim (2008). A Model of the IMF as a Coinsurance Arrangement. Economics: The Open-Access, Open-Assessment E-Journal, 2 (2008-14): 1—41. http://dx.doi.org/10.5018/economics-ejournal.ja.2008-14

Assessment

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