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Agency and communication problems in IMF conditional lending

Author

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  • Floriana Cerniglia

    ()

  • Laura Sabani

Abstract

The combination of special interest politics (agency problems) and informational asymmetries presents serious problems as the implementation of Fund conditionality is concerned. In this paper we focus on the role that the transmission of information between the IMF and the borrowing government has for the design of the most e??cient "incentive contract." Specifically, we find that when agency problems are especially severe, and/or IMF information is very valuable, a centralized control is indeed optimal (conventional conditionality). To the contrary, when local knowledge is more important than the agency bias we expect delegation (ownership) to be the optimal incentive scheme.

Suggested Citation

  • Floriana Cerniglia & Laura Sabani, 2008. "Agency and communication problems in IMF conditional lending," Working Papers 139, University of Milano-Bicocca, Department of Economics, revised Jun 2008.
  • Handle: RePEc:mib:wpaper:139
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    File URL: http://dems.unimib.it/repec/pdf/mibwpaper139.pdf
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    More about this item

    Keywords

    IMF conditionality; delegation; communication;

    JEL classification:

    • 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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