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Read my lips: the role of information transmission in multilateral reform design

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Author Info
Silvia Marchesi
Laura Sabani
Axel Dreher

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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 cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany). in its series cege – Center for European, Governance and Economic Development Research Discussion Papers with number 86.

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Length: 40 pages
Date of creation: 18 Jun 2009
Date of revision: 18 Jun 2009
Handle: RePEc:got:cegedp:86

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Web page: http://www.cege.uni-goettingen.de
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Related research
Keywords: IMF conditionality; delegation; communication; ownership; panel;

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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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    Other versions:
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    Other versions:
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