Does the IMF Program Implementation Matter for Sovereign Spreads? The Case of Selected European Emerging Markets

July 9, 2019
Issue 2019-01


The paper analyzes the impact of International Monetary Fund (IMF) programs, in conjunction with country-specific fundamentals and global factors, on the sovereign spreads in selected European emerging market economies (EMEs) from 2000 to 2016. For this purpose, we construct IMF indexes to capture the size of financial resources and the degree of implementation of IMF programs. Our sample is limited to countries belonging to the same region and having IMF programs and data on sovereign spreads over the same period. Our findings are unique in the current literature. They suggest that the size of financial resources and the degree of implementation of IMF programs matter for sovereign spreads, whereas the mere presence of IMF programs does not seem to affect them. Available IMF financial resources and a good implementation of IMF programs are associated with lower sovereign spreads in our panel. In addition, our results show that country-specific fundamentals and global factors remain the primary drivers of sovereign spreads.

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JEL classification:
E44, F33, G15
Sovereign spreads, emerging markets, IMF arrangements, global risk

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