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Is the "Surge" Working? Some New Facts

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  • Michael Greenstone

Abstract

There is a paucity of facts about the effects of the recent military "Surge" on conditions in Iraq and whether it is paving the way for a stable Iraq. Selective, anecdotal and incomplete analyses abound. Policy makers and defense planners must decide which measures of success or failure are most important, but until now few, if any, systematic analyses were available on which to base those decisions. This paper applies modern statistical techniques to a new data file derived from more than a dozen of the most reliable and widely-cited sources to assess the Surge's impact on three key dimensions: the functioning of the Iraqi state (including violent civilian casualties); military casualties; and financial markets' assessment of Iraq's future. The new and unusually rigorous findings presented here should help inform current evaluations of the Surge and provide a basis for better decision making about future strategy. The analysis reveals mixed evidence on the Surge's effect on key trends in Iraq. The security situation has improved insofar as violent civilian fatalities have declined without any concurrent increase in casualties among coalition and Iraqi troops. However, other areas, such as oil production and the number of trained Iraqi Security Forces have shown no improvement or declined. Evaluating such conflicting indicators is challenging. There is, however, another way to assess the Surge. This paper shows how data from world financial markets can be used to shed light on the central question of whether the Surge has increased or diminished the prospect of today's Iraq surviving into the future. In particular, I examine the price of Iraqi state bonds, which the Iraqi government is currently servicing, on world financial markets. After the Surge, there was a sharp decline in the price of those bonds, relative to alternative bonds. This decline signals a 40% increase in the market's expectation that Iraq will default. This finding suggests that, to date, the Surge is failing to pave the way toward a stable Iraq and may in fact be undermining it.

Suggested Citation

  • Michael Greenstone, 2007. "Is the "Surge" Working? Some New Facts," NBER Working Papers 13458, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13458 Note: EEE LE LS PE
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    1. repec:reg:rpubli:259 is not listed on IDEAS
    2. Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 107-126, Spring.
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    Cited by:

    1. Byung-Yeon Kim & Gerard Roland, 2011. "Are the Markets Afraid of Kim Jong-Il?," KIER Working Papers 789, Kyoto University, Institute of Economic Research.
    2. Singhal, Saurabh & Nilakantan, Rahul, 2016. "The economic effects of a counterinsurgency policy in India: A synthetic control analysis," European Journal of Political Economy, Elsevier, vol. 45(C), pages 1-17.
    3. Saurabh Singhal & Rahul Nilakantan, 2012. "Naxalite Insurgency and the Economic Benefits of a Unique Robust Security Response," HiCN Working Papers 127, Households in Conflict Network.
    4. Jo Thori Lind & Karl Ove Moene & Fredik Willumsen, 2014. "Opium for the Masses? Conflict-Induced Narcotics Production in Afghanistan," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 949-966, December.
    5. Radha Iyengar & Jonathan Monten, 2008. "Is There an "Emboldenment" Effect? Evidence from the Insurgency in Iraq," NBER Working Papers 13839, National Bureau of Economic Research, Inc.
    6. Radha Iyengar, 2010. "The Impact of Asymmetric Information Among Competing Insurgent Groups: Estimating an 'Emboldenment' Effect," CEP Discussion Papers dp1018, Centre for Economic Performance, LSE.

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation

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