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Does it take two to tango? How to improve cooperation between the IMF and the World Bank

Listed author(s):
  • Silvia Marchesi

    ()

  • Laura Sabani

Despite a series of official agreements aimed at strengthening Bank-Fund cooperation, it is widely believed that coordination between the two organizations often falls short of what should be rationally expected. A greater pressure for conformity, required by the need of coordination, may contrast with the objective of enhancing policy adaptation to the specific conditions revealed by each institution’s specialized expertise. In this paper we present a theoretical model which, focusing on the quality of information transmission between the IMF and the WB, analyzes the impact of different governance structures on the degree of Bank-Fund cooperation. We compare the performance of a “delegation-scheme” with that of a “centralization-scheme.” A centralized structure better addresses the necessity of coordinating policy actions but greater consistency between the Bank and the Fund policy actions will be achieved at the expenses of a less satisfactory adaptation to “local conditions.” When the need for coordination is relevant, as it is generally the case for the Bank and the Fund operations, we find that a centralized governance structure allows to achieve a level of overall payoff greater than those of a decentralized one.

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File URL: http://dems.unimib.it/repec/pdf/mibwpaper232.pdf
File Function: First version, 2013
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 232.

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Length: 21
Date of creation: Feb 2013
Date of revision: Feb 2013
Handle: RePEc:mib:wpaper:232
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  1. Marchesi, Silvia & Sabani, Laura & Dreher, Axel, 2011. "Read my lips: The role of information transmission in multilateral reform design," Journal of International Economics, Elsevier, vol. 84(1), pages 86-98, May.
  2. Anne O. Krueger, 1998. "Whither the World Bank and the IMF?," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1983-2020, December.
  3. Heikki Rantakari, 2008. "Governing Adaptation -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1257-1285.
  4. William Easterly, 2008. "Institutions: Top Down or Bottom Up?," American Economic Review, American Economic Association, vol. 98(2), pages 95-99, May.
  5. Feinberg, Richard E., 1988. "The changing relationship between the World Bank and the International Monetary Fund," International Organization, Cambridge University Press, vol. 42(03), pages 545-560, June.
  6. Sivlai Marchesi & Emanuela Sirtori, 2010. "Is two better than one? Effects on growth of Bank-Fund interaction," Working Papers 189, University of Milano-Bicocca, Department of Economics, revised Jun 2010.
  7. Michael Fabricius, 2007. "Merry Sisterhood or Guarded Watchfulness? Cooperation Between the International Monetary Fund and the World Bank," Working Paper Series WP07-9, Peterson Institute for International Economics.
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