Real and Financial Sector Returns, the IMF, and the Asian Crisis

Abstract

This paper examines the impact of International Monetary Fund (IMF) announcements programs on different sectors of the economy. Previous studies approach this issue from the perspective of financial sector and/or composite index returns only; there is limited evidence on the impact of IMF actions on stock prices in non-financial sectors. This paper provides comprehensive evidence on the impact of IMF related announcements in different sectors of the economy during the Asian crisis. The results indicate that IMF actions affect sector returns asymmetrically, suggesting that investors have different expectations regarding the restructuring costs associated with IMF-imposed reforms in certain sectors. More important, the results that indicate the net wealth effects of IMF actions in private financial markets can be best understood by providing evidence from both financial and non-financial sectors.

Keywords: crisis, IMF, stock returns