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1. Measuring Risk: Political Risk Insurance Premiums and Domestic Political Institutions

Author:
Nathan Jensen
Publication Date:
09-2005
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
There is a resurgence in the literature in political science on how political risk affects multinational corporations operating in emerging markets. Most existing studies suffer from data problems where researchers can only offer indirect evidence of the relationship between political institutions and political risk. In this paper I utilize a new data resource to explore how domestic institutions affect political risks for multinationals. Utilizing price data from political risk insurance agencies I test how domestic political institutions affect the premiums multinationals pay for coverage against 1) expropriations and contract disputes and 2) government restrictions on capital transactions. I find that constraints on politicians lead to marginally lower expropriation and transfer risks. Democracy, on the other hand, greatly reduces expropriation risk but has no impact on transfer risk.
Topic:
Economics, Government, Political Economy, and Politics

2. The Bargain of the Unstable: Trade Negotiations and Financial Crises in Mercosur 1995-2001

Author:
Pablo Heidrich
Publication Date:
02-2005
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
Argentina and Brazil suffered grave financial crises during the 1990s. During that time, they were involved in trade negotiations with each other inside Mercosur. As the financial crises struck one or the other country, their negotiating positions varied from accommodating to aggressive, leading to peaks of confrontation from which Mercosur has not quite recovered yet. Furthermore, those crises provoked a large number of trade disputes as protectionism from both countries grew when the crises increasingly hurt their economies.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Brazil, Argentina, and Latin America

3. The Inefficient Use of Power: Costly Conflict with Complete Information

Author:
Robert Powell
Publication Date:
02-2004
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
Recent work across a wide range of issues in political economy as well as in American, comparative, and international politics tries to explain the inefficient use of power — revolutions, civil wars, high levels of public debt, international conflict, and costly policy insulation — in terms of commitment problems. This paper shows that a common mechanism is at work in a number of these diverse studies. This common mechanism provides a more general formulation of a type of commitment problem that can arise in many different substantive settings. The present analysis then formalizes this mechanism as an “inefficiency condition” which ensures that all of the equilibria of a stochastic game are inefficient. This condition has a natural substantive interpretation: Large, rapid changes in the actors' relative power (measured in terms of their minmax payoffs) may cause inefficiency.
Topic:
Foreign Policy, Economics, Government, and Politics
Political Geography:
America

4. The Meaning of Monetary Power

Author:
Benjamin J. Cohen
Publication Date:
02-2004
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
What is the meaning of monetary power? No one doubts that money is inherently political, an integral part of global “high politics.” Yet remarkably few scholars of international relations have attempted to explore the notion of monetary power in formal analytical terms. As Jonathan Kirshner has accurately noted, the topic is “a neglected area of study” (1995:3).
Topic:
International Relations, Economics, Government, and International Trade and Finance

5. Picking Up the Pieces: Comparing the Social Impact of Finacial Crisis in Mexico and Argentina

Author:
Manuel Pastor and Carol Wise
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
After a committed process of macroeconomic stabilization that began during the mid-1980s in most of Latin America, many observers began to speak of the need for a “second generation” of reforms that could more firmly establish the bases for economic growth and correct for longstanding distributional inequities. By the mid-1990s serious reformers like Argentina and Mexico seemed to be on the cusp of tackling this distributional backlog by launching so-called second phase market reforms meant to correct for earlier shortcomings in the social realm (Naím 1995; Pastor and Wise 1999). However, in both cases, financial crises erupted: Mexico's crash of December 1994, which saw a forty percent devaluation of the peso and a massive outflow of portfolio capital; and, more recently, Argentina's 2002 meltdown, which while simmering since the Brazilian devaluation of 1999, finally caused the country's commitment to a fixed exchange rate to be abandoned.
Topic:
Economics and Government
Political Geography:
Brazil, Argentina, South America, Latin America, North America, and Mexico

6. Why Delegate the Allocation of Foreign Aid to Multilateral Organizations? Principal-Agent Problems and Multilateralism

Author:
Helen Milner
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
Why do countries delegate the distribution of foreign aid to international institutions? Specifically, why have the advanced industrial countries chosen to distribute part of their foreign aid through multilateral organizations, such as the European Union (EU), World Bank, IMF, UN, and regional development banks (RDBs)? The delegation of aid provision to an international institution is puzzling. Why would governments relinquish control over their aid if they are a useful instrument of statecraft? Governments delegate aid delivery to international institutions when their publics lack information about the consequences of aid and fear that their governments will deviate from their wishes concerning its use. By using the international organization to send aid, the government issues a credible signal to voters about the use of foreign aid. This signal leaves all actors better off by helping to solve a principal-agent problem in domestic politics. When publics are skeptical about the benefits of aid, governments are more likely to turn aid over to multilateral organizations in order to reassure taxpayers that their money is being well spent. Using data on about 20 donor countries of the OECD from 1960-2000, I investigate the sources of multilateral giving, showing that public opinion has the expected negative relationship to multilateral aid-giving.
Topic:
International Relations, Foreign Policy, Economics, and International Trade and Finance
Political Geography:
Europe and United Nations

7. A Cross-Regional Analysis of Civil Society and Democratic Development

Author:
Andrew Green
Publication Date:
09-1999
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
Domestic instability often has a deleterious effect at the international level, too, particularly as more states adopt democratic institutions and market-oriented economies. Whether we are talking about failing multi-ethnic states and their impact on the UN and NATO, or about failing economies and their impact on international markets and such international organizations as the IMF and the World Bank, it is clear that the domestic and international levels cannot be separated. While instability may arise from many different sources, the state-society connection is perhaps the most problematic: a democracy in which the only link between citizens and politicians is the electoral connection is a democracy impoverished by stagnant ideas and limited societal input. A state disconnected from society is prone to domestic instability, with negative effects at both the domestic and international levels.
Topic:
NATO, Civil Society, Democratization, Economics, Ethnic Conflict, International Political Economy, and Political Economy
Political Geography:
United Nations

8. Collective Management of International Financial Crises

Author:
Saori N. Katada
Publication Date:
07-1998
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
The world has experienced many financial crises. Despite numerous research and policy efforts in prevention to present them at of large scale, the global economy has not seen economists' (and investors') Nirvana of financial globalization without the occasional crises. On the contrary, the increasing dynamism and changing nature of financial flows across national borders seem to have created a larger number of new problems for creditors, debtors and international financial institutions. That has typically been true for middle income countries in Latin America and Asia and, very recently, in Eastern Europe, which have been integrated into the international financial system. During the two decades between the late 1970s and the late 1990s, three major sets of financial crises originated from those middle income countries, intensifying concerns for international financial stability.
Topic:
Economics, Globalization, International Political Economy, and International Trade and Finance
Political Geography:
Europe, Israel, East Asia, Latin America, Central America, and North America

9. International Financial Markets as Sources of Crises or Discipline

Author:
Thomas D. Willett
Publication Date:
07-1998
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
Two major views dominate policy discussions of the role of international capital flows in the global political economy. While both believe that high capital mobility is eroding national sovereignty, one sees this as a positive step, that constrains governments' tendencies to follow overexpansionary macroeconomic policies for domestic political gain and promotes convergence toward low rates of inflation. Advocates of this viewpoint would typically agree with Haggard and Maxfield (1996) that “Increased financial integration holds governments hostage to foreign exchange and capital markets, forcing greater fiscal and monetary discipline than they might otherwise choose” (p. 36). This view is implied by most of the currently most popular economic models. The second viewpoint sees international capital markets as capricious followers of fads and fashions that pose serious challenges to domestic financial stability. The statements of Dr. Mahathir Mohamad, Prime Minister of Malaysia are typical of this view.
Topic:
Economics, Government, International Political Economy, and International Trade and Finance