Comments on “Reflections on moral hazard and private sector involvement in the resolution of emerging market financial crises”

Michael Mussa has written a convincing and useful chapter on the questionable logic surrounding parts of the PSI debate. His two principal conclusions can be summarised as follows. First, the problems that are commonly associated with moral hazard and “excessive” IMF lending are greatly exaggerated. Second, two different, and perhaps more pernicious, forms of moral hazard can nevertheless arise whenever the IMF deviates from the principles embodied in its Articles of Agreement.