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Is Transparency Good for You, and Can the IMF Help?

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Author Info
Yongseok Shin
Rachel Glennerster
Abstract

This paper finds that reforms introduced by the IMF to promote transparency have created more informed markets and reduced borrowing costs for those emerging market countries that volunteered for them. Using a quarterly panel estimation with fixed country effects, we find that sovereign spreads fall following the adoption of three different transparency reforms. The effects are economically important, especially for those countries with low initial transparency. We use two-stage least squares to address any endogeneity in the timing of reforms exploiting internal IMF timetables that are unrelated to country events. Next, using a panel GARCH specification, we show that spreads move more than normal in the days immediately following publication of IMF country documents.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/132.

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Length: 46 pages
Date of creation: 09 Jul 2003
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Handle: RePEc:imf:imfwpa:03/132

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Related research
Keywords: Transparency ; Fund role ; Article IV consultations ; Reports on the Observance of Standards and Codes ; Special Data Dissemination Standard ; Emerging markets ; Capital markets ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mitchell, Mark L & Mulherin, J Harold, 1994. " The Impact of Public Information on the Stock Market," Journal of Finance, American Finance Association, vol. 49(3), pages 923-50, July. [Downloadable!] (restricted)
  2. Olivier Ledoit & Pedro Santa-Clara & Michael Wolf, 2003. "Flexible Multivariate GARCH Modeling with an Application to International Stock Markets," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 735-747, 07. [Downloadable!] (restricted)
  3. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March. [Downloadable!] (restricted)
  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  5. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December. [Downloadable!] (restricted)
  6. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2002. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," Working Papers 02-16, Duke University, Department of Economics. [Downloadable!]
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  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December. [Downloadable!] (restricted)
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  8. Gaston R. Gelos & Shang-Jin Wei, 2002. "Transparency and International Investor Behavior," IMF Working Papers 02/174, International Monetary Fund. [Downloadable!]
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  9. Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 523-543, December. [Downloadable!]
  10. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Pierluigi Balduzzi & Edwin J. Elton & T. Clifton Green, 1997. "Economic News and the Yield Curve: Evidence from the U.S. Treasury Market," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-005, New York University, Leonard N. Stern School of Business-.
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  12. James E. Alt & David Dreyer Lassen, 2003. "Fiscal Transparency and Fiscal Policy Outcomes in OECD Countries," EPRU Working Paper Series 03-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  13. Robert F. Engle & Kevin Sheppard, 2001. "Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH," University of California at San Diego, Economics Working Paper Series 2001-15, Department of Economics, UC San Diego. [Downloadable!]
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  14. Alberto Alesina & Ricardo Hausmann & Rudolf Hommes & Ernesto Stein, 1996. "Budget Institutions and Fiscal Performance in Latin America," NBER Working Papers 5586, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Georgios Chortareas & David Stasavage & Gabriel Sterne, . "Does it pay to be transparent? International evidence from central bank forecasts," Bank of England working papers 143, Bank of England. [Downloadable!]
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  16. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998-2), pages 1-136. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. S. Nuri Erbas & Abbas Mirakhor, 2007. "The Equity Premium Puzzle, Ambiguity Aversion, and Institutional Quality," IMF Working Papers 07/230, International Monetary Fund. [Downloadable!]
  2. Jonathan David Ostry & Jeromin Zettelmeyer, 2005. "Strengthening IMF Crisis Prevention," IMF Working Papers 05/206, International Monetary Fund. [Downloadable!]
  3. John Cady & Jesus Gonzalez-Garcia, 2006. "The IMF's Reserves Template and Nominal Exchange Rate Volatility," IMF Working Papers 06/274, International Monetary Fund. [Downloadable!]
  4. John Cady & Anthony J. Pellechio, 2006. "Sovereign Borrowing Cost and the IMF's Data Standards Initiatives," IMF Working Papers 06/78, International Monetary Fund. [Downloadable!]
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