A Cure Worse Than the Disease?

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Abstract
This chapter examines the output costs of participating in International Monetary Fund (IMF)-supported stabilization programs following a currency or balance-of-payment crisis. The analysis of the 1997 East Asian crisis reveals that participation in an IMF program is associated with a 0.75 percentage point reduction in gross domestic product growth and that participation in an IMF-supported program following a balance-of-payments or currency crisis does not appear to mitigate the output loss associated with such events. The study also found that the country that did not have an IMF program suffered more than those countries with programs.

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