IMF Support and Crisis Prevention

This Occasional Paper examines the various roles of IMF financing in crisis prevention. Emerging economies experiencing financial crises have been subject to enormous economic and social costs, highlighting the importance of crisis prevention. While the main defense against a crisis lies in a country’s own policies and institutional framework, the IMF can contribute to these efforts through surveillance, technical assistance, and the promotion of standards and codes. But the IMF may be able to prevent crises more directly by providing contingent financial support. This paper explores the theoretical basis of, and empirical evidence for, possible crisis prevention programs.