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Who is Running the IMF: Critical Shareholders or the Staff?

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  • Michele Fratianni

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • John Pattison

    (Canadian Imperial Bank of Commerce)

Abstract

The paper deals with the principal-agent relationship at the International Monetary Fund (IMF). We argue that residual control rights at the IMF are vested with the critical shareholders, the countries included in the G-7. This group controls vast financial resources and enjoys the highest regulatory and governance standards among IMF members. Imperfect incentives for monitoring and the complexity of the issues give staff and management a degree of autonomy. The evidence marshalled in the paper suggests that critical shareholders are in charge on those issues they care most about, leaving discretion to staff and management on peripheral issues.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2004-06-fratianni-pattison.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2004-06.

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Date of creation: 2004
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Handle: RePEc:iuk:wpaper:2004-06

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Keywords: IMF; G-7; principal-agent relationship; critical shareholder; staff autonomy;

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  1. Roland Vaubel & Axel Dreher & U─čurlu Soylu, 2007. "Staff growth in international organizations: A principal-agent problem? An empirical analysis," Public Choice, Springer, vol. 133(3), pages 275-295, December.
  2. Thomas D. Willett, 2001. "Upping the Ante for Political Economy Analysis of the International Financial Institutions," The World Economy, Wiley Blackwell, vol. 24(3), pages 317-332, 03.
  3. Tirole, J., 1993. "The Internal Organization of Government," Working papers 93-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Fukuda, Shin-ichi & Hoshi, Takeo & Ito, Takatoshi & Rose, Andrew, 2006. "International Finance," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 455-458, December.
  5. Hart, Oliver, 1995. "Corporate Governance: Some Theory and Implications," Economic Journal, Royal Economic Society, vol. 105(430), pages 678-89, May.
  6. Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc.
  7. Barnett, Michael N. & Finnemore, Martha, 1999. "The Politics, Power, and Pathologies of International Organizations," International Organization, Cambridge University Press, vol. 53(04), pages 699-732, September.
  8. Michael Mussa, 2002. "Argentina and the Fund: From Triumph to Tragedy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa67.
  9. Michael D. Bordo & Harold James, 2000. "The International Monetary Fund: Its Present Role in Historical Perspective," NBER Working Papers 7724, National Bureau of Economic Research, Inc.
  10. Nielson, Daniel L. & Tierney, Michael J., 2003. "Delegation to International Organizations: Agency Theory and World Bank Environmental Reform," International Organization, Cambridge University Press, vol. 57(02), pages 241-276, March.
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