IMF concern for reputation and conditional lending failure: Theory and empirics |
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Authors: | Silvia Marchesi Laura Sabani |
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Institution: | University of Milano-Bicocca, Italy; University of Florence, Italy |
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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's 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. |
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Keywords: | C23 D82 F34 N2 |
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