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International Monetary Fund. External Relations Dept.

No one quite knows how much money is laundered every year, but informed guesses estimate that the illicit economy could amount to as much as 2–5 percent of world GDP. National law enforcement agencies have been fighting financial crime for many years, and the terrorist attacks of September 11, 2001, made the fight against money laundering and the financing of terrorism a top priority also for the international community. The IMF has emerged as a key player because of its expertise in financial systems and near-universal membership of 184 countries. Camilla Andersen of the IMF Survey asked Barry Johnston, Assistant Director in the Monetary and Financial Systems Department, who leads the IMF’s financial sector work on anti-money laundering, and Jean-François Thony, Assistant General Counsel in the Legal Department, who is in charge of the legal aspects, about the progress made to date.

Andrew K. Rose and Mark M. Spiegel*

One reason why countries service their external debts is the fear that default might lead to shrinkage of international trade. If so, then creditors should systematically lend more to countries with which they share closer trade links. We develop a simple theoretical model to capture this intuition, then test and corroborate this idea. [JELF15, F33]