The IMF Safety Net and Emerging Markets' Sovereign Spreads

This paper assesses empirically the effectiveness of the IMF as a component of the Global Financial Safety Net by running a panel regression on a sample of emerging market countries' sovereign spreads. In particular, we check if the size of the Fund's lending capacity and the introduction of the new precautionary facilities play a role in explaining emerging market countries' spreads, after controlling for the traditional determinants of the spreads reported in the literature. From a policy perspective, the empirical evidence presented in this paper can provide a basis for assessing the potential gains from a stronger role of the IMF and of the GFSN in general, an important issue in the current international debate. We find that what appears to matter most are the overall resources available for lending by the IMF, rather than the channels through which such resources can be accessed by members