Financial Sector Conditionality: Is Tougher Better?

34 Pages Posted: 3 Mar 2006

See all articles by Alessandro Giustiniani

Alessandro Giustiniani

International Monetary Fund (IMF) - Monetary and Financial Systems Department; Bank of Italy - Research Department

Roger Kronenberg

International Monetary Fund (IMF) - Monetary and Financial Systems Department

Date Written: December 2005

Abstract

The aim of this paper is to take a closer look at IMF conditionality in the banking sector. Our analysis shows that while such conditionality became more stringent following the Asian crisis, compliance has remained broadly unchanged, comparing unfavorably with other structural reforms. The results of panel data regressions show that while compliance with IMF-supported banking sector reform strategies has contributed to an improvement in banking sector performance, increases in the hardness and intensity of IMF conditionality may not be, ceteris paribus, effective. The policy implication is that the IMF should, therefore, continue its efforts in enhancing countries' ownership and streamlining conditionality.

Keywords: Conditionality, financial sectors

JEL Classification: F33, G0, G21

Suggested Citation

Giustiniani, Alessandro and Kronenberg, Roger, Financial Sector Conditionality: Is Tougher Better? (December 2005). IMF Working Paper, Vol. , pp. 1-34, 2005. Available at SSRN: https://ssrn.com/abstract=888099

Alessandro Giustiniani (Contact Author)

International Monetary Fund (IMF) - Monetary and Financial Systems Department ( email )

Washington, DC
United States

Bank of Italy - Research Department ( email )

Via Nazionale 91
00184 Roma
Italy

Roger Kronenberg

International Monetary Fund (IMF) - Monetary and Financial Systems Department ( email )

Washington, DC
United States

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