Agency and communicaton in IMF conditional lending: Theory and empirical evidence
theory and empirical evidence
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Date
2009-02
Publication Type
Working Paper
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yes
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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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published
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Volume
218
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KOF Swiss Economic Institute, ETH Zurich
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Subject
ECONOMETRICS AND ECONOMETRIC MODELS (OPERATIONS RESEARCH); panel data; communication; GOVERNMENT BORROWING; ASYMMETRIC INFORMATION (INFORMATION THEORY); FINANCIAL MARKETS; INTERNATIONAL MONETARY FUND; INTERNATIONALER WÄHRUNGSFONDS; FINANZMÄRKTE; ÖFFENTLICHE KREDITAUFNAHME; delegation; ASYMMETRISCHE INFORMATIONEN (INFORMATIONSTHEORIE); ÖKONOMETRIE UND ÖKONOMETRISCHE MODELLE (OPERATIONS RESEARCH); UNSICHERE INFORMATION + UNVOLLSTÄNDIGE INFORMATION (INFORMATIONSTHEORIE); IMF conditionality; UNCERTAIN INFORMATION + INCOMPLETE INFORMATION (INFORMATION THEORY)
Organisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute