Adoption of an IMF Programme and Debt Rescheduling. An Empirical Analysis

The existence of an empirical relationship between the adoption of an IMF programme and the concession of a debt rescheduling by commercial creditors is tested using a bivariate probit model. If countries who have arrangements with the IMF are more likely than others to obtain a rescheduling of their external debt we could conclude that the adoption of an IMF programme could work as a sort of signal of a country’s “good willingness”, which is thus rewarded with the debt relief. The results confirm the existence of a significant effect of the adoption of an IMF programme on the subsequent concession of a debt rescheduling by creditors.IMF Conditionality, Debt Rescheduling, Bivariate probit

Adoption of an IMF Programme and Debt Rescheduling. An Empirical Analysis

The existence of an empirical relationship between the adoption of an IMF programme and the concession of a debt rescheduling by commercial and official creditors is tested using a bivariate probit model. If countries who have arrangements with the IMF are more likely than others to obtain a rescheduling of their external debt we could conclude that the adoption of an IMF programme could work as a sort of signal of a country’s “good willingness”, which is thus rewarded with the debt relief. The results confirm the existence of a significant effect of the adoption of an IMF programme on the subsequent concession of a debt rescheduling by creditors.IMF Conditionality ; Debt Rescheduling ; Bivariate probit

How defensive were lending and aid to HIPC?

We investigate whether defensive lending and defensive granting motivated the transfer of resources by official donors to low income countries. We estimate a dynamic panel of 75 low-income IDA and IDA-Blend countries for the period 1982 to 2008, where the sample includes 41 HIPC and a control group of other 34 low- income countries. Our results point to no evidence of defensive lending as opposed to strong evidence of defensive granting. Both bilateral and multilateral donors reduce their loans as the debt they hold increases (where such “correction” is actually weaker in the case of multilateral loans to HIPC). Official donors provide more grants as multilateral debt increases where this effect is significant only for debt- ridden HIPC countries. This result is consistent with a substitution of grants for loans and the new approach to debt sustainability, but questions the efficiency and selectivity of the aid policy.debt relief, foreign aid, highly indebted poor countries.

Prolonged Use and Conditionality Failure: Investigating the IMF Responsibility

Prolonged use of Fund resources has consistently expanded since the 1970s among both lowincome and middle-income countries. Overall this phenomenon suggests a lack of effectiveness of Fund supported programs. Such conditionality failure has been explained by the literature by looking both at the characteristics of the borrowing countries and at the lack of credibility of the IMF threat of interrupting financial assistance in case of non compliance with conditionality. In this paper we suggest that such lack of credibility might be attributed to the dual role played by the IMF, which acts at the same time as a creditor and as a monitor (or as an advisor) of economic reforms. We show that the Fund desire to hide its surveillance failures, in order to preserve its reputation of being a good monitor/advisor, may actually distort its lending decisions towards greater laxity in punishing non-compliance with economic reforms. Such laxity may be exacerbated by the length of the relationship between a country and the Fund. Thus we claim that prolonged use of IMF resources is not only a consequence of a lack of effectiveness of adjustment lending but it might itself be a determinant of conditionality failure.IMF conditionality, incomplete information, reputation

Prolonged Use and Conditionality Failure: Investigating IMF Responsibility

IMF conditionality, incomplete information, reputation

IMF concern for reputation and conditional lending failure: theory and empirics

The IMF is entrusted with the twofold task of enforcing conditionality and deciding whether or not to continue financial assistance. In this paper we examine the implications on IMF lending behaviour of the existence of uncertainty about its ability to monitor governments’ actions and to enforce conditionality. It is shown that the existence of an even small degree of uncertainty about the IMF ability as a monitor generates incentives for the IMF to take actions to protect its reputation as a good monitor. In turn, this desire for reputation distorts IMF incentive to interrupt financial assistance, i.e. programmes will be interrupted less often than it would be socially desirable. We have empirically investigated whether IMF disbursements are affected by the IMF own share of debt, which is taken as an indicator of the length of the relationship between a country and the IMF. The longer their relationship, the stronger IMF reputation will be affected in case it ultimately decides to interrupt the lending. Our results show that a higher IMF debt share does increase IMF disbursements.IMF programmes, conditionality, incomplete information, reputation, dynamic panel

IMF concern for reputation and conditional lending failure: theory and empirics

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.IMF programmes, conditionality, incomplete information, reputation, dynamic panel

Adoption of an IMF programme and debt rescheduling: an empirical analysis

The existence of an empirical relationship between the adoption of an IMF programme and the concession of a debt rescheduling by commercial and official creditors is tested using a bivariate probit model. If countries who have arrangements with the IMF are more likely than others to obtain a rescheduling of their external debt we could conclude that the adoption of an IMF programme could work as a sort of signal of a country's "good willingness", which is thus rewarded with the debt relief. The results confirm the existence of a significant effect of the adoption of an IMF programme on the subsequent concession of a debt rescheduling by creditors

Buybacks of domestic debt in public debt management

In the model a fiscal stabilisation is announced under asymmetry of information between the government and the private investors. The government could be of two types: a dry type and a wet type, according to the amount of spending cuts it decides to make. Private investors may thus lack confidence in the stabilisation program and interest rates would be too high, reflecting this lack of credibility. A dry type which has to finance new spending may want to signal its resolution (type) in order to lower its interest costs and one way to do that would be to repurchase a fraction of the outstanding debt. The wet type could also decide to buyback some of its debt in order to pretend to be a dry type and to (possibly) lower its interest payments. It is showed that a critical amount of buyback exists such that the two types could be separated

The Labor Market in the Seventeenth-Century Italian Art Sector

We analyze the labor market for painters in Baroque Rome using unique panel data on primary sales of still lifes, portraits, genre paintings, landscapes and figurative paintings. In line with the traditional artistic hierarchy of genres, average price differentials between them were high. We identify supply and demand factors related to prices of paintings. The panel dimension of the dataset and its matched painter-patron nature allows us to evaluate the extent to which price heterogeneity is related to unobservable characteristics of painters and patrons. We find that most of the inter-genre price differential is explained by the variation in average artist heterogeneity across genres. This suggests that the market allocated artists between artistic genres to the point of equalizing the marginal return of each genre. We also explain residual price differences in terms of efficiency wage, signalling and incentive mechanisms to induce effort in the production of artistic quality.Art market, Occupational choice, Wage equalization, Signalling