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IMF Surveillance and Financial Markets - A Political Economy Analysis

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Author Info

  • Marcel Fratzscher
  • Julien Reynaud

Abstract

The International Monetary Fund (IMF) is in the process of re-inventing itself with bilateral and multilateral surveillance emerging as a key function. The paper analyses how IMF surveillance announcements may be influenced by political power that member countries exert at the IMF. First, we analyze the content of Article IV Public Information Notices (PIN), and second, we use the financial market reaction to the release PINs as tools to identify the role of political economy factors for IMF surveillance. For a set of emerging market economies, the paper finds that financial markets react more favorable to PIN releases for politically influential member countries. Moreover, IMF surveillance appears to be systematically more favorable for countries with larger IMF loans outstanding, consistent with the finding in the literature that the IMF may engage in ‘defensive surveillance’.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-06/cesifo1_wp3089.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3089.

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Date of creation: 2010
Date of revision:
Handle: RePEc:ces:ceswps:_3089

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Keywords: IMF; surveillance; political economy; sovereign spreads; financial markets; emerging market economies;

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References

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Citations

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Cited by:
  1. Weisbrot, Mark & Jorgensen, Helene, 2013. "Macroeconomic policy advice and the article IV consultations comparative overview of European Union member states," ILO Working Papers 485513, International Labour Organization.
  2. Menegaki, Angeliki N. & Ozturk, Ilhan, 2013. "Growth and energy nexus in Europe revisited: Evidence from a fixed effects political economy model," Energy Policy, Elsevier, vol. 61(C), pages 881-887.
  3. Frenkel, Michael & Rülke, Jan-Christoph & Zimmermann, Lilli, 2013. "Do private sector forecasters chase after IMF or OECD forecasts?," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 217-229.
  4. Chen, Yu-Fu & Funke, Michael, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," SIRE Discussion Papers 2010-48, Scottish Institute for Research in Economics (SIRE).
  5. Fuchs , Andreas & Gehring , Kai, 2013. "The Home Bias in Sovereign Ratings," Working Papers 0552, University of Heidelberg, Department of Economics.
  6. Islam, Iyanatul & Ahmed, Ishraq & Roy, Rathin & Ramos, Raquel, 2012. "Macroeconomic policy advice and the Article IV consultations a development perspective," ILO Working Papers 478371, International Labour Organization.

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