Agency and Communication in IMF Conditional Lending: Theory and Empirical Evidence
CESifo Working Paper Series No. 2574
KOF Working Paper No. 218
54 Pages Posted: 11 Mar 2009
There are 2 versions of this paper
Agency and Communication in IMF Conditional Lending: Theory and Empirical Evidence
Date Written: March 2009
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.
Keywords: IMF conditionality, delegation, communication, panel data
JEL Classification: C23, D82, F33, N2
Suggested Citation: Suggested Citation
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