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Why Not Default?$
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Jerome Roos

Print publication date: 2019

Print ISBN-13: 9780691180106

Published to Princeton Scholarship Online: May 2019

DOI: 10.23943/princeton/9780691180106.001.0001

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From IMF Poster Child to Wayward Student

From IMF Poster Child to Wayward Student

Chapter:
(p.185) Thirteen From IMF Poster Child to Wayward Student
Source:
Why Not Default?
Author(s):

Jerome Roos

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691180106.003.0014

This chapter considers why the International Monetary Fund (IMF) did it not prevent Argentina's record default of 2001. It suggests that the IMF was both unable and unwilling to stop it. While the second enforcement mechanism of conditional IMF lending was initially fully operative, helping to enforce Argentina's compliance in the first years of the crisis, the outcome of the megaswap greatly reduced the risk of an Argentine default to the international financial system. Combined with mounting domestic opposition in the United States to further international bailout loans, this greatly weakened the IMF's capacity to impose fiscal discipline on Argentina, eventually leading the Fund to pull the plug on its own bailout program, causing the second enforcement mechanism to break down altogether. The chapter recounts the process through which this breakdown occurred.

Keywords:   International Monetary Fund, IMF, financial crisis, debt crisis, Argentina, sovereign debt, default, bailout

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