IMF Surveillance and Financial Markets - A Political Economy Analysis

Marcel Fratzscher and Julien Reynaud

No 3089, CESifo Working Paper Series from CESifo

Abstract: The International Monetary Fund (IMF) is in the process of re-inventing itself with bilateral and multilateral surveillance emerging as a key function. The paper analyses how IMF surveillance announcements may be influenced by political power that member countries exert at the IMF. First, we analyze the content of Article IV Public Information Notices (PIN), and second, we use the financial market reaction to the release PINs as tools to identify the role of political economy factors for IMF surveillance. For a set of emerging market economies, the paper finds that financial markets react more favorable to PIN releases for politically influential member countries. Moreover, IMF surveillance appears to be systematically more favorable for countries with larger IMF loans outstanding, consistent with the finding in the literature that the IMF may engage in ‘defensive surveillance’.

Keywords: IMF; surveillance; political economy; sovereign spreads; financial markets; emerging market economies (search for similar items in EconPapers)
JEL-codes: F30 F33 F40 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: IMF surveillance and financial markets--A political economy analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3089

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