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Read my Lips: the Role of Information Transmission in multilateral reform design

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  • Silvia Marchesi

    ()
    (University of Milan Bicocca and Centro Studi Luca d’Agliano)

  • Laura Sabani

    (University of Florence)

  • Axel Dreher

    (University of Goettingen, KOF Swiss Economic Institute, IZA and CESifo)

Abstract

We focus on the role that the transmission of information between a multilateral (e.g., the IMF) and a country has for optimal (conditional) reform design. The main result is that the informational advantage of the country must be strictly greater than the advantage of the multilateral in order to increase a country\'s discretion in the choice of the policies to be implemented (country ownership). To the contrary, an increase in the conflict of interests between the multilateral and the country may lead the multilateral to leave more freedom in designing reforms, which is at odds to what is commonly argued. Our empirical results provide support to the idea that the IMF follows an optimal allocation rule of control rights over policies, leaving the recipient countries more freedom whenever their local knowledge appears to be crucial for designing more adequate reforms.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 274.

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Length: 43
Date of creation: 31 Jul 2009
Date of revision:
Handle: RePEc:csl:devewp:274

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Keywords: IMF conditionality; delegation; communication; ownership; panel data;

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Citations

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Cited by:
  1. Axel Dreher & Kai Gehring & Christos Kotsogiannis & Silvia Marchesi, 2013. "Information transmission within federal fiscal architectures: Theory and evidence," Working Papers 253, University of Milano-Bicocca, Department of Economics, revised Sep 2013.
  2. Silvia Marchesi & Alessandro Missale, 2012. "Did high debts distort loans and grants allocation to IDA countries?," Working Papers 226, University of Milano-Bicocca, Department of Economics, revised Aug 2012.
  3. Roland Hodler, 2011. "Development (Paradigm) Failures," Working Papers 11.01, Swiss National Bank, Study Center Gerzensee.
  4. Morana, Claudio, 2013. "Oil price dynamics, macro-finance interactions and the role of financial speculation," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 206-226.
  5. Silvia Marchesi & Laura Sabani, 2013. "Does it Take Two to Tango? Improving Cooperation between the IMF and the World Bank: Theory and Empirical Evidence," Development Working Papers 357, Centro Studi Luca d\'Agliano, University of Milano.
  6. Axel Dreher & Silvia Marchesi, 2013. "Information Transmission and Ownership Consolidation in Aid Programs," Development Working Papers 356, Centro Studi Luca d\'Agliano, University of Milano.
  7. Silvia Marchesi & Laura Sabani, 2013. "Does it take two to tango? How to improve cooperation between the IMF and the World Bank," Working Papers 232, University of Milano-Bicocca, Department of Economics, revised Feb 2013.
  8. Molly Bauer & Cesi Cruz & Benjamin Graham, 2012. "Democracies only: When do IMF agreements serve as a seal of approval?," The Review of International Organizations, Springer, vol. 7(1), pages 33-58, March.

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