1 Is Transparency Good For Is Transparency Good For You? You? by by Rachel Glennerster, Yongseok Shin Rachel Glennerster, Yongseok Shin Discussed by: Campbell R. Harvey Duke University National Bureau of Economic Research IMF Annual Research Conference November 4-5, 2004
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Is Transparency Good For You? by Rachel Glennerster, Yongseok Shin
IMF Annual Research Conference November 4-5, 2004. Is Transparency Good For You? by Rachel Glennerster, Yongseok Shin. Discussed by: Campbell R. Harvey Duke University National Bureau of Economic Research. Motivation. Popular Opinion: - PowerPoint PPT Presentation
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Is Transparency Good For You? Is Transparency Good For You? by by
• Country effects• Time effects• Transparency dummies
– Pub, ROSC, SDDS
• Interaction terms– Marginal benefit of transparency – increasing/decreasing?
• Std Errors – corrected with Newey West
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Estimation
Panel estimation: (p.14)• Other variables:
– Kauffman et al’s rule of law, Transparency International’s Corruption Perception Index
– Size of debt market– Macro variables (inflation, current account/GDP, fiscal
balance/GDP)– PIN (Public Info Notice)
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Estimation
Panel estimation: (p.14)• Model (6)
– 16 variables, 23 country effects, 14 time effects– 322 observations
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Endogeneity Problem
Adopting the IMF disclosure is a government decision. The decision could be strategic and related to growth opportunities in the economy.
• Hence, any relation between spreads and publishing could be spuriously induced as a result of severe endogeneity
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Endogeneity Problem
Author’s approach:
“Any endogeneity bias is corrected for in two ways..”
1. Exclude program countries
2. 2SLS
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Endogeneity Problem
2SLS
First stage:(i) Run OLS regression of Pub dummy (e.g.) on:
average time between Article IV discussions, interacted with regional dummies, GDP per capita in 1998, size of debt market, rule of law, voice, corruption, squares of some of the variables, regional dummies
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Endogeneity Problem
2SLS
First stage:(ii) Regression (1) has 322 observations,
40 variables and 85% R-square.
(iii) Full 2SLS similar to OLS
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Endogeneity Problem
2SLS issues
1. Fitted values lie outside the 0-1 range2. Is it really the case that the 45 variables are uncorrelated
with spreads? “…the precise timing of compliance depends more on the time since the country committed to meet the specifications of the SDDS than on concurrent events.”
3. With enough variables in the first, we would get a 100% R-square. It is no surprise that the results are similar.