Table 5 analyzes ratings “adjustments.” For these probit regressions, country-question observations are coded 1 if the final, official rating for 2011 set following the review process differs from the one proposed by the regions and sent to the networks and central units for review. “Adjustment” is coded 0 if and only if the final rating is the same as the one proposed by the region.

There were 36 adjustments, out of the 42 instances in which network reviewers had disagreed with the proposed rating. As in the IEG’s (2010) analysis of 2007 ratings, therefore, in most cases of disagreement the network recommendations prevailed in 2011. By this measure, the network review appears to have a significant influence on the ratings. Presumably, the neutral role and cross-regional perspectives of the networks serve to improve the accuracy of the ratings overall, even if there is no way of knowing what the “true” rating should be in each instance of ratings disagreement or adjustment. Because most adjustments are downward rather than upward, the network reviews also help counteract ratings inflation over time, although again there is no way of knowing the “true” time trend of average ratings for each question.

The probability of an adjustment is about 5 percentage points higher for ECA’s ratings than for the other regions. Equation 5.1 of Table 5 presents regional and question effects, without controlling for any other variables. Ratings for question 16 are significantly more likely (again, by about 5 percentage points) to be adjusted than those for the other three questions.

Equation 5.2 controls for the effects of proposed increases and other variables on the likelihood of ratings adjustments. Proposed increases are the most powerful predictor of ratings adjustments. Higher ratings levels and lower write-up grades are also associated with an increased likelihood that the final rating is different from the one proposed by the region. The regional effects in equation 5.1 largely disappear in equation 5.2: controlling for ECA’s propensity to propose more ratings increases, its ratings are no more likely to be adjusted than those of other regions. Ratings for questions 14 and 15 are significantly less likely to be adjusted than those for questions 12 and 16.

# **8. Testing for Regional or IDA Bias**

As IEG (2010: 50) notes, the reviews conducted by the six regional Chief Economists’ offices are intended mostly to correct for over-exuberance regarding individual countries’ ratings, but “there could still be issues” regarding _inter_ -regional comparability “even if the relative rankings of countries are adjusted” appropriately within each _intra_ -regional review.

Gelb, Ngo and Ye (2004) test for an Africa bias in the CPIA, but do not test for any other regional biases. Specifically, they regress CPIA cluster D scores on a simple average of the six Worldwide Governance Indicators (WGI) indexes and on a dummy for Sub-Saharan African countries. The CPIA-WGI relationship is very strong and significant, but the Africa dummy is insignificant. Similarly, they report no Africa bias in regressing either cluster D or cluster B scores on the Heritage Foundation’s Economic Freedom Index, or in regressing cluster C scores on the UNDP’s Human Development Index.

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