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Room to Move: International Financial Markets and National Welfare States


  • Mosley, Layna


A central research question in international political economy concerns the influence of financial markets on government policy outcomes. To what extent does international capital mobility limit government policy choices? I evaluate the relationship between international financial markets and government policy outcomes, with a focus on the government bond market in developed democracies. Evidence includes interviews with financial market participants and a cross-sectional time-series analysis of the determinants of interest rates. This evaluation suggests that governments of developed democracies face strong but narrowly defined financial market pressures. Financial market participants are concerned with a few macroeconomic policy indicators, including inflation rates and government deficit/GDP ratios, but not with micropolicy indicators, such as the distribution of government spending across functional categories. In these areas, governments retain policymaking autonomy. I conclude by exploring the role of financial market influences within domestic politics and offering suggestions for further research.

Suggested Citation

  • Mosley, Layna, 2000. "Room to Move: International Financial Markets and National Welfare States," International Organization, Cambridge University Press, vol. 54(4), pages 737-773, October.
  • Handle: RePEc:cup:intorg:v:54:y:2000:i:04:p:737-773_44

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    1. Belke, Ansgar H. & Baumgärtner, Frank & Schneider, Friedrich & Setzer, Ralph, 2005. "The Different Extent of Privatisation Proceeds in EU Countries: A Preliminary Explanation Using a Public Choice Approach," IZA Discussion Papers 1741, Institute of Labor Economics (IZA).
    2. Obinger, Herbert & Zohlnhöfer, Reimut, 2005. "Selling off the family silver: the politics of privatization in the OECD 1990-2000," TranState Working Papers 15, University of Bremen, Collaborative Research Center 597: Transformations of the State.
    3. F.K. Siebrits & E. Calitz, 2004. "Should South Africa Adopt Numerical Fiscal Rules?1," South African Journal of Economics, Economic Society of South Africa, vol. 72(4), pages 759-783, September.
    4. Stephen B. Kaplan, 2018. "The Rise of Patient Capital: The Political Economy of Chinese Global Finance," Working Papers 2018-2, The George Washington University, Institute for International Economic Policy, revised Jul 2018.
    5. David James Gill, 2015. "Rating the UK: the British government's sovereign credit ratings, 1976–8," Economic History Review, Economic History Society, vol. 68(3), pages 1016-1037, August.
    6. Amy Pond, 2018. "Protecting Property: The Politics of Redistribution, Expropriation, and Market Openness," Economics and Politics, Wiley Blackwell, vol. 30(2), pages 181-210, July.
    7. Stephen Kaplan, 2014. "The China Boom in Latin America: An End to Austerity," Working Papers 2014-19, The George Washington University, Institute for International Economic Policy.
    8. Stephen Kaplan, 2015. "Banking Unconditionally: The Political Economy of Chinese Finance in Latin America," Working Papers 2015-14, The George Washington University, Institute for International Economic Policy.
    9. Mark Hallerberg & Guntram Wolff, 2008. "Fiscal institutions, fiscal policy and sovereign risk premia in EMU," Public Choice, Springer, vol. 136(3), pages 379-396, September.
    10. Hanna Lierse & Laura Seelkopf, 2016. "Room to Manoeuvre? International Financial Markets and the National Tax State," New Political Economy, Taylor & Francis Journals, vol. 21(1), pages 145-165, February.
    11. Geoffrey R D Underhill & Xiaoke Zhang, 2006. "Norms, Legitimacy, and Global Financial Governance," WEF Working Papers 0013, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    12. Niamh Hardiman & Patrick Murphy & Orlaith Burke, 2008. "Legitimating Fiscal Stabilization: Ireland in Comparative Perspective," Working Papers 200813, Geary Institute, University College Dublin.
    13. Stephen Kaplan, 2016. "Fighting Past Economic Wars: Crisis and Austerity in Latin America," Working Papers 2015-13, The George Washington University, Institute for International Economic Policy.
    14. Gerard Strange, 2018. "The euro crisis, euro reform, and the problem of hegemony," Asia Europe Journal, Springer, vol. 16(2), pages 125-139, June.
    15. Stephan Kaplan, 2016. "partisan Technocratic Cycles in Latin America," Working Papers 2016-28, The George Washington University, Institute for International Economic Policy.

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