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Non-economic engagement and international exchange: the case of environmental treaties

  • Andrew K. Rose
  • Mark M. Spiegel

We examine the role of non-economic partnerships in promoting international economic exchange. Since far-sighted countries are more willing to join costly international partnerships such as environmental treaties, environmental engagement tends to encourage international lending. Countries with such non-economic partnerships also find it easier to engage in economic exchanges since they face the possibility that debt default might also spill over to hinder their non-economic relationships. We present a theoretical model of these ideas, and then verify their empirical importance using a bilateral cross-section of data on international crossholdings of assets and environmental treaties. Our results support the notion that international environmental cooperation facilitates economic exchange.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2006-33.

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Date of creation: 2006
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Handle: RePEc:fip:fedfwp:2006-33
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