Imf Concern for Reputation and Conditional Lending Failure: Theory and Empirics

42 Pages Posted: 17 Jan 2006

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

Date Written: November 2005

Abstract

In this paper we suggest that the dual role played by the IMF, as a creditor and as a monitor of economic reforms, might explain the lack of credibility of the Fund threat of sanctioning non-compliance with conditionality. Specifically,we show that the IMF desire to preserve its reputation as a good monitor may distort its lending decisions towards some laxity. Moreover, such distortionary incentives may be exacerbated by the length of the relationship between a country and the Fund. Estimating a dynamic panel of 53 middle-income countries, for the period 1982-2001, we find that a longer relationship does increase IMF disbursements.

Keywords: IMF programmes, conditionality, incomplete information, reputation, dynamic panel

JEL Classification: C23, D82, F34, N2

Suggested Citation

Marchesi, Silvia and Sabani, Laura, Imf Concern for Reputation and Conditional Lending Failure: Theory and Empirics (November 2005). Available at SSRN: https://ssrn.com/abstract=876559 or http://dx.doi.org/10.2139/ssrn.876559

Silvia Marchesi (Contact Author)

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

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