Does Transparency Pay?
AbstractThis paper studies whether transparency (measured by accuracy and frequency of macroeconomic information released to the public) leads to lower borrowing costs in sovereign bond markets. We analyze the data generated during 1999–2002 when the International Monetary Fund (IMF) instituted new ways for countries to increase their transparency—by publishing the IMF's assessment of their policies and committing to release more accurate data more frequently. The IMF's preexisting internal timetable for country reports introduced exogenous variation when countries were faced with the option to become more transparent. We exploit this time variation and construct instruments to estimate the impact of transparency on bond yields in a way that is free from endogeneity bias. We find that countries experience a statistically significant decline in borrowing costs (11 percent reduction in credit spreads on average) when they choose to become more transparent. The magnitude of the decline is inversely related to the initial level of transparency and the size of the debt market. IMF Staff Papers (2007) 55, 183–209; doi:10.1057/palgrave.imfsp.9450028; published online 22 January 2008
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Volume (Year): 55 (2008)
Issue (Month): 1 (April)
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- Stephen Nelson, 2010. "Does compliance matter? Assessing the relationship between sovereign risk and compliance with international monetary law," The Review of International Organizations, Springer, vol. 5(2), pages 107-139, June.
- Barry Eichengreen, 2009. "From the Asian crisis to the global credit crisis: reforming the international financial architecture redux," International Economics and Economic Policy, Springer, vol. 6(1), pages 1-22, June.
- Lightfoot, Geoffrey & Wisniewski, Tomasz, 2014. "Information Asymmetry and Power in a Surveillance Society," MPRA Paper 53109, University Library of Munich, Germany.
- Pintea Mirela-Oana & Achim Sorin Adrian & Lacatus Viorel, 2013. "Transparency Of Local Budgets In The North-West Region Of Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 931-941, July.
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