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IMF concern for reputation and conditional lending failure: theory and empirics

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Author Info
Silvia Marchesi () (Department of Economics, University of Milan-Bicocca)
Laura Sabani (Dipartimento di Studi sullo Stato,Università di Firenze)

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Abstract

In this paper we suggest that the dual role played by the IMF, as a creditor and as a monitor of economic reforms, might explain the lack of credibility of the Fund threat of sanctioning non-compliance with conditionality. Specifically, we show that the IMF desire to preserve its reputation as a good monitor may distort its lending decisions towards some laxity. Moreover, such distortionary incentives may be exacerbated by the length of the relationship between a country and the Fund. Estimating a dynamic panel of 53 middle-income countries, for the period 1982-2001, we find that a longer relationship does increase IMF disbursements.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper114.pdf
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Publisher Info
Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 114.

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Length: 35 pages
Date of creation: 2007
Date of revision: 2007
Handle: RePEc:mib:wpaper:114

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Related research
Keywords: IMF programmes; conditionality; incomplete information; reputation; dynamic 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
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
N2 - Economic History - - Financial Markets and Institutions

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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.:
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  4. Axel Dreher & Jan-Egbert Sturm, 2006. "Do IMF and World Bank Influence Voting in the UN General Assembly?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  5. Axel Dreher & Roland Vaubel, 2002. "Does the IMF cause moral hazard and political business cycles? Evidence from panel data," International Finance 0207002, EconWPA. [Downloadable!]
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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. Silvia Marchesi & Laura Sabani & Axel Dreher, 2009. "Read my Lips: the Role of Information Transmission in multilateral reform design," Development Working Papers 274, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
    Other versions:
  2. Axel Dreher & Stefan Voigt, 2008. "Does Membership in International Organizations Increase Governments’ Credibility? Testing the Effects of Delegating Powers," Working papers 08-193, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
    Other versions:
  3. Silvia Marchesi & Laura Sabani, 2005. "Prolonged Use and Conditionality Failure: Investigating the IMF Responsibility," Development Working Papers 202, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
  4. Silvia Marchesi & Laura Sabani & Axel Dreher, 2009. "Agency and communication in IMF conditional lending: theory and empirical evidence," Working Papers 151, University of Milano-Bicocca, Department of Economics, revised Feb 2009. [Downloadable!]
    Other versions:
  5. Axel Dreher, 2009. "IMF conditionality: theory and evidence," Public Choice, Springer, vol. 141(1), pages 233-267, October. [Downloadable!] (restricted)
    Other versions:
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