IMF-related news and emerging financial markets

We examine the reaction of financial market returns and volatility in a diverse group of six emerging markets to a set of IMF events during the Asian, Russian and Brazilian crises of 1997-1999. Focusing on stock markets first, we find that on average, negative (positive) IMF news reduces (increases) daily stock returns by about one percentage point. The most influential event is the delay of loans from the IMF For foreign exchange market returns, we only observe significant effects of bad IMF news, and on bond markets neither good nor bad news seems to affect interest rate spreads. IMF news does not have a significant impact on the volatility of the financial markets. Further, both gains and losses resulting from IMF news tend to be neutralized within one day after the announcement. Finally, we find that IMF news does not cause creditor panic. (c) 2005 Elsevier Ltd. All rights reserved.