Economic Consequences of Greylisting by the Financial Action Task Force

This study considers the impact of FATF’s greylisting process from a market perspective. The results are intended to inform development public policy and improvement signalling. develops theoretical model identifies indicators which may banking operations institutional decisions. It is explicitly market-oriented in that seeks reflect how stakeholders financial non-financial markets typically respond signals sent out by FATF. authors find signalling has changed over time distinguish four broad periods reflecting different messaging. uses financial, trade, other variables derived World Bank’s ‘World Development Indicators’ databank explore evidence each phases approach greylisting. pooled cross-section series with fixed effects, based on sample 177 countries 3540 country-years data 2000 2020. examines impacts net official assistance, environment (non-performing loans, risk premiums), foreign assets, indebtedness, capitalisation. finds significant correlations between many FATF listing events, including an apparent reduction assistance during endured after country was delisted. concern, as such reductions disproportionately developing economies.