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Predicting Winners in Civil Wars

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  • Haber, Stephen H
  • Weidenmier, Marc
  • Oosterlinck, Kim
  • Mitchener, Kris

Abstract

We develop a method to estimate which side will win a civil war. The key insight we deliver is that, for typical sovereign debt contracts, the probability of debt repayment will equal the probability of victory in a civil war. We test our predictor for standard outcomes in civil wars, including when the incumbent government loses (the Chinese Nationalists), when a new government is installed by a foreign power and decides to repudiate debt (the restoration of Ferdinand VII of Spain), and when there is a secession (the U.S. Confederacy). For China, markets were predicting a Communist victory three years before it happened. For the U.S., markets never gave the South much more than a 40 percent chance of maintaining the Confederacy. For Spain, markets considered the restoration of Ferdinand VII as likely (probabilities above 50%) as soon as France declared its intention to send military forces to the area.

Suggested Citation

  • Haber, Stephen H & Weidenmier, Marc & Oosterlinck, Kim & Mitchener, Kris, 2014. "Predicting Winners in Civil Wars," CEPR Discussion Papers 10109, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10109
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    Cited by:

    1. Jopp, Tobias A., 2017. "How does the public perceive alliances? The Central and Allied Powers in World War I," IBF Paper Series 12-17, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.

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    More about this item

    Keywords

    Civil wars; Predictions markets; Conflict; Asset prices;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets
    • N2 - Economic History - - Financial Markets and Institutions
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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