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Agency and communication in IMF conditional lending: theory and empirical evidence

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Author Info
Silvia Marchesi () (Dipartimento di Economia Politica, Università di Milano Bicocca)
Laura Sabani (Dipartimento di Studi saullo Stato, Università di Firenze)
Axel Dreher () (Economics Department, 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 (the IMF) and a country has for the optimal design of conditional reforms. Our model predicts that when agency problems are especially severe, and/or IMF information is valuable, a centralized control is indeed optimal. To the contrary, when local knowledge is more important than the agency bias we expect delegation to dominate. Controlling for economic and political factors, our empirical tests show that the number of IMF conditions is lower in countries with a greater social complexity, while it increases with the bias of the countries’ authorities, openness, and transparency, consistently with the theory.

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Publisher Info
Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 09-218.

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Length: 52 pages
Date of creation: Feb 2009
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Handle: RePEc:kof:wpskof:09-218

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

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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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