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Read my Lips: the Role of Information Transmission in multilateral reform design

Author

Listed:
  • Silvia Marchesi

    () (University of Milan Bicocca and Centro Studi Luca d’Agliano)

  • Laura Sabani

    (University of Florence)

  • Axel Dreher

    (University of Goettingen, KOF Swiss Economic Institute, IZA and CESifo)

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.

Suggested Citation

  • 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.
  • Handle: RePEc:csl:devewp:274
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Axel Dreher & Sarah Langlotz & Silvia Marchesi, 2017. "Information Transmission And Ownership Consolidation In Aid Programs," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1671-1688, October.
    2. Morana, Claudio, 2013. "Oil price dynamics, macro-finance interactions and the role of financial speculation," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 206-226.
    3. Silvia Marchesi & Laura Sabani, 2013. "Does it take two to tango? Improving cooperation between the IMF and the World Bank: theory and empirical evidence," Working Papers - Economics wp2013_20.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    4. Axel Dreher & Kai Gehring & Christos Kotsogiannis & Silvia Marchesi, 2013. "Information transmission within federal fiscal architectures: Theory and evidence," Working Papers 253, University of Milano-Bicocca, Department of Economics, revised Sep 2013.
    5. Marchesi, Silvia & Missale, Alessandro, 2013. "Did High Debts Distort Loan and Grant Allocation to IDA Countries?," World Development, Elsevier, vol. 44(C), pages 44-62.
    6. Molly Bauer & Cesi Cruz & Benjamin Graham, 2012. "Democracies only: When do IMF agreements serve as a seal of approval?," The Review of International Organizations, Springer, vol. 7(1), pages 33-58, March.
    7. Hodler, Roland & Dreher, Axel, 2013. "Development (paradigm) failures," Journal of Development Economics, Elsevier, vol. 101(C), pages 63-74.
    8. Silvia Marchesi & Laura Sabani, 2013. "Does it take two to tango? How to improve cooperation between the IMF and the World Bank," Working Papers 232, University of Milano-Bicocca, Department of Economics, revised Feb 2013.

    More about this item

    Keywords

    IMF conditionality; delegation; communication; ownership; panel data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • N2 - Economic History - - Financial Markets and Institutions

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