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Investing in the Peace: Economic Interdependence and International Conflict

  • Gartzke, Erik
  • Li, Quan
  • Boehmer, Charles
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    Research appears to substantiate the liberal conviction that tradefosters global peace. Still, existing understanding of linkages betweenconflict and international economics is limited in at least two ways.First, cross-border economic relationships are far broader than justtrade. Global capital markets dwarf the exchange of goods and services,and states engage in varying degrees of monetary policy coordination.Second, the manner in which economics is said to inhibit conflictbehavior is implausible in light of new analytical insights about thecauses of war. We discuss, and then demonstrate formally, howinterdependence can influence states recourse to military violence. Therisk of disrupting economic linkages particularly access tocapital mayoccasionally deter minor contests between interdependent states, butsuch opportunity costs will typically fail to preclude militarizeddisputes. Instead, interdependence offers nonmilitarized avenues forcommunicating resolve through costly signaling. Our quantitative resultsshow that capital interdependence contributes to peace independent ofthe effects of trade, democracy, interest, and other variables.

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    Article provided by Cambridge University Press in its journal International Organization.

    Volume (Year): 55 (2001)
    Issue (Month): 02 (March)
    Pages: 391-438

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    Handle: RePEc:cup:intorg:v:55:y:2001:i:02:p:391-438_44
    Contact details of provider: Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK
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