Read My Lips: The Role of Information Transmission in Multilateral Reform Design

CEGE Discussion Papers No. 86

40 Pages Posted: 3 Jul 2009

See all articles by Silvia Marchesi

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES); University of Milan - Centro Studi Luca d'Agliano (LdA)

Laura Sabani

University of Florence

Axel Dreher

Heidelberg University

Date Written: June 2009

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.

Keywords: IMF conditionality, delegation, communication, ownership, panel data

JEL Classification: C23, D82, F33, N2

Suggested Citation

Marchesi, Silvia and Sabani, Laura and Dreher, Axel, Read My Lips: The Role of Information Transmission in Multilateral Reform Design (June 2009). CEGE Discussion Papers No. 86, Available at SSRN: https://ssrn.com/abstract=1427786 or http://dx.doi.org/10.2139/ssrn.1427786

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy
+39 02 64483057 (Phone)

HOME PAGE: http://https://sites.google.com/site/ssilviamarchesi/home

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

University of Milan - Centro Studi Luca d'Agliano (LdA)

Via P. Amedeo 34
Milano, Mi 20122
Italy

Laura Sabani

University of Florence ( email )

Piazza di San Marco, 4
Florence, 50121
Italy

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

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