تاثیر خبر صندوق بین المللی پول مرتبط بر بازارهای سرمایه: شواهد بیشتر از گسترش اوراق قرضه در اندونزی و کره

The IMF's effects on private capital markets have attracted increasing attention in the literature. This paper examines whether IMF-related news during the Asian crisis contains information regarding the changes in sovereign bond spreads of Indonesia and Korea. Our results indicate that other countries’ IMF-related news increases these countries’ bond spreads. Both in Indonesia and Korea, the countries’ own news associated with program negotiations and approval decreases bond spreads. With respect to the interpretations of the impact of IMF news on private capital markets, we show that the current interpretations vary and identify this issue as an important future research agenda.

The impact of IMF programs on capital markets has been increasingly investigated since the late 1990s (Kamin and Kleist, 1999, Zhang, 1999, Lane and Phillips, 2000, Tillmann, 2001, Dell’Ariccia et al., 2002, Kamin, 2002, Hayo and Kutan, 2005, Kutan and Sudjana, 2003, Evrensel and Kutan, 2006 and Eichengreen et al., 2005). Our contribution lies in further examining the changes in sovereign bond spreads of Indonesia and Korea due to IMF-related news, such as announcements of program negotiations and approval, during the Asian crisis. We identify three areas to which our paper can contribute to the literature: estimation of the impact of IMF news on capital markets, definition of the IMF-related dummies, and interpretation of the empirical results. The existing literature on the relation between IMF programs and private capital markets has motivated our focus regarding the selection of the sample countries, the type of capital markets, and the methodology. With respect to the estimation of the IMF's effects on capital markets, we make use of Table 1 that surveys the existing research on this issue. We want to underline the characteristics of previous studies regarding the type of capital instrument, data, and IMF-related dummies employed. The majority of studies that examine bond markets in emerging countries use some variations of the Emerging Market Bond Index (EMBI) that includes 21 emerging economies’ dollar denominated debt. Latin America's debt instruments, especially Brady bonds, have a weight of 91% in the EMBI (IMF, 1996). Even though non-Latin debt increased its share from zero to almost 33% during the period from April 1991 to October 2001, the EMBI was still heavily influenced by the Latin American debt during the mid- and late-1990s, which are the years of interest in most of the previous studies. The problem with employing the EMBI spreads in a study focusing on mainly non-Latin American capital markets is that the changes in EMBI spreads are less likely to contain relevant information regarding the extent of changes in the bond spreads of, for example, the Asian crisis countries. Therefore, unlike the previous studies on bond markets, we use country-specific data in our estimations. Table 1. Overview of empirical studies on the IMF's impact on private capital markets Author(s) Type of the capital market Country/region data IMF-related variables Method useda Kamin and Kleist (1999) Bonds EMBI IMF program dummy OLS Zhang (1999) Bonds Argentina, Chile, China, Colombia, Hungary, Mexico, Philippine, Venezuela IMF program dummy OLS Lane and Phillips (2000) Bonds EMBI IMF-related news dummies Observation of the effects of IMF-related news on spreads Tillmann (2001) Bonds EMBI IMF-related news dummies Markov-switching GARCH-M Zhang (2001) Bank loans Korea IMF-related news dummies Event study Dell’Ariccia et al. (2002) Bonds EMBIGb IMF program dummy OLS Kamin (2002) Bonds EMBI IMF program dummy OLS Hayo and Kutan (2005) Stocks Emerging markets IMF-related news dummies GARCH Kutan and Sudjana (2003) Stocks Indonesia IMF-related news dummies GARCH Evrensel and Kutan (2006) Stocks Thailand, Korea, and Indonesia IMF-related news dummies GARCH Eichengreen et al. (2005) Bonds and commercial bank loans Syndicated loans and bond issues in emerging markets IMF program dummy Probit a These methods are used to estimate the changes in bond spreads or stock market returns due to the actual or expected involvement of the IMF in relevant countries. b EMBIG refers to J.P. Morgan's Emerging Market Bond Index Global that contains secondary market bond spreads. Table options Regarding the use of IMF-related dummy in the previous research, this variable covers the entire IMF program period in Zhang (1999), Kamin and Kleist (1999), Dell’Ariccia et al. (2002), Kamin (2002), and Eichengreen et al. (2005). While the IMF program dummy measures the ex-post effects of a program in financial markets, IMF-related news dummies describe the ex-ante response of investors to the prospective program. By observing the changes in spreads associated with IMF-related news, we can capture the immediate investor response based on the current and expected future fundamentals. Therefore, with respect to the estimation of the IMF's impact on capital markets, an examination of the changes in country-specific spreads due to IMF-related news is in fact a new approach that is complementary to the existing studies. It allows us to check the sensitivity of existing results to using alternative approaches like ours. The third area to which this paper contributes to the literature is the identification of different interpretations of the results regarding the IMF's impact on private capital markets. Because these interpretations are still in their infancy, a discussion on alternative interpretations is useful for future research. For example, Eichengreen et al. (2005) propose the possibility that the IMF acts as a monitoring agency, providing private information to capital markets. Additionally, if one believes that IMF-supported programs would help improve the performance of program countries, declining spreads or increasing stock market returns as a respond to the IMF's involvement can be interpreted as investors’ expectations of greater transparency and efficiency in program countries’ capital markets. Alternatively, the above mentioned changes in bond and stock markets may have moral hazard interpretation. Indeed, the IMF's financial support to the Asian crisis countries has raised the question of whether IMF programs provide opportunities for the governments of prospective program countries to grant implicit guarantees to certain investors. It has been argued that an expected IMF support to a country may provide implicit guarantees to its creditors on their returns, which motivates investors to take excessive risks (Edwards, 1998 and Friedman, 1998). We therefore argue that the current interpretations of the impact of IMF programs on private capital markets vary. We attempt to identify the missing elements in the literature on this issue. We summarize our results as follows. First, other countries’ IMF-related news increases the relevant country's spreads. Second, as far as the countries’ own news is concerned, both in Indonesia and Korea, most of the announcements associated with program negotiations and approval lead to declining spreads. While moral hazard and signaling approaches yield different interpretations of these results, the common problem of both approaches is the absence of any connection between the results regarding spreads and relevant countries’ fundamentals. We propose that future research should identify concepts and techniques that simultaneously capture the changes in countries’ fundamentals and spreads. The paper is organized as follows. Section 2 presents a theoretical framework, in which the changes in bond spreads are discussed. Section 3 defines the relevant IMF-related news, estimates the changes in sovereign bond spreads in Indonesia and Korea based on the GARCH models, and contrasts alternative interpretations of these changes. Finally, Section 4 provides concluding remarks.

In this paper, we contribute to the existing research regarding the IMF's effects on private capital markets. First, using the news approach, we estimate the changes in daily bond spreads in Indonesia and Korea due to IMF-related news during the Asian crisis. Our results indicate that other countries’ IMF-related news do not affect the country's spreads. As far as the countries’ own news is concerned, both in Indonesia and Korea, the announcements associated with program negotiations and approval lead to declining spreads. Second, we compare our results to those of the previous studies and discuss how they interpret their empirical results. Third, while the empirical studies that use composite bond indices such as the EMBI find increasing spreads associated with IMF programs, the studies that use country-specific bond data, such as our paper, find declining spreads. We emphasize the importance of using country-specific bond data, including both IMF-related news and program duration dummies. We note that the current practice is to interpret the results regarding spreads either as the lack of domestic implicit guarantees (increasing spreads) or the IMF's successful execution of its surveillance role (declining spreads). However, previous studies do not provide any proof for their interpretation, and there exists no approach that can clearly identify either the existence or the absence of domestic implicit guarantees. Clearly, the proof for the presence or absence of moral hazard lies in the examination of the country's fundamentals. Empirical evidence for moral hazard in a country's sovereign bond markets has to demonstrate a decline in bond spreads due to IMF-related news, while the country's current and expected fundamentals are worsening. Alternatively, if declining spreads are viewed as a sign of the IMF's surveillance capability, this needs to be demonstrated in the form of improving current and expected fundamentals. Because the outcome of declining spreads is consistent with two conflicting states (expected improvement in fundamentals or existence of implicit guarantees), future research should focus on the identification and estimation of these fundamentals along with bond spreads. Only then, we can verify whether prospective IMF programs motivate investors to take excessive risks or signal improved future fundamentals.