Does IMF Transparency Matter? Evidence from Emerging Markets, 1997-2008

Abstract

A dramatic change has taken place in the manner in which the IMF conducts its annual surveillance of member state economies. These annual consultations (known as Article IV consultations) were originally viewed as private matters. Starting in 1997, the IMF released summary information about a country’s consultation on a voluntary basis. Recently, countries could choose to release the consultation team’s report itself, which is prepared for discussion by the Fund’s Executive Board. This raises the question of how and to what extent international markets respond to this transparency. This paper builds on the work of Fratzscher and Reynaud (2011) and Glennerster and Shin (2008) to estimate the effects of Article IV data release on spreads on emerging market debt. This project is supported by a grant from the National Science Foundation (SES-0960422) We find strong evidence that Article IV transparency reduces spreads on emerging market debt, and these findings are robust across the release of different types of information as well as numerous alternative specifications.