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Room to Move: International Financial Markets and National Welfare States

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  • Mosley, Layna

Abstract

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(04), pages 737-773, September.
  • Handle: RePEc:cup:intorg:v:54:y:2000:i:04:p:737-773_44
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    Cited by:

    1. 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.
    2. 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.
    3. 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 for the Study of Labor (IZA).
    4. F.K. Siebrits & E. Calitz, 2004. "Should South Africa Adopt Numerical Fiscal Rules?," South African Journal of Economics, Economic Society of South Africa, vol. 72(4), pages 759-783, September.
    5. 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.
    6. 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.
    7. 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.
    8. Niamh Hardiman & Patrick Murphy & Orlaith Burke, 2008. "Legitimating Fiscal Stabilization: Ireland in Comparative Perspective," Working Papers 200813, Geary Institute, University College Dublin.
    9. 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.
    10. 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.

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