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

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Author Info
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)

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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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Publisher 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
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Handle: RePEc:csl:devewp:274

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

Other versions of this item:

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
N2 - Economic History - - Financial Markets and Institutions

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  6. Avinash Dixit, 2009. "Governance Institutions and Economic Activity," American Economic Review, American Economic Association, vol. 99(1), pages 5-24, March. [Downloadable!]
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  8. Raghuram G. Rajan, 2008. "The Future of the IMF and the World Bank," American Economic Review, American Economic Association, vol. 98(2), pages 110-15, May. [Downloadable!]
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    Other versions:
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