IDEAS home Printed from https://ideas.repec.org/p/rza/ersawp/109.html

Financial Statecraft: Government Choice of Debt Instruments

Author

Listed:
  • Eric Arias

    (College of William & Mary)

  • Layna Mosley

    (University of North Carolina)

  • B. Peter Rosendorff

    (New York University)

Abstract

We explore the diversity of means by which governments borrow – from commercial banks, sovereign bond issues, official bilateral creditors, and multilateral financial institutions. Although political economy scholars tend to analyze financing instruments in isolation from one another, governments make choices across borrowing instruments. Although these choices partly reflect governments’ macroeconomic profiles and country creditworthiness, they also reflect governments’ efforts to engage in financial statecraft, often for domestic reasons. These motivations include transparency: governments that are inclined not to make available information about the state of their economy and financial institutions will, all else equal, tend to borrow from commercial banks (versus to issue bonds), or to borrow from official bilateral creditors (rather than multilateral ones). Borrowing from these entities imposes fewer disclosure requirements, and disclosures are made to a narrower audience. We test, and find support for, our hypotheses using data on the composition of government debt over time, for a large set of developing countries. We further assess, and again find support for, our expectations using data on the borrowing behavior of Mexican municipalities.

Suggested Citation

  • Eric Arias & Layna Mosley & B. Peter Rosendorff, 2020. "Financial Statecraft: Government Choice of Debt Instruments," ERSA Working Paper Series 109, Economic Research Southern Africa.
  • Handle: RePEc:rza:ersawp:109
    as

    Download full text from publisher

    File URL: https://ersawps.org/index.php/working-paper-series/article/view/109/83
    File Function: First version, 2020
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Vreeland,James Raymond, 2003. "The IMF and Economic Development," Cambridge Books, Cambridge University Press, number 9780521016957, June.
    2. Vreeland,James Raymond & Dreher,Axel, 2014. "The Political Economy of the United Nations Security Council," Cambridge Books, Cambridge University Press, number 9780521740067.
    3. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    4. Beaulieu, Emily & Cox, Gary W. & Saiegh, Sebastian, 2012. "Sovereign Debt and Regime Type: Reconsidering the Democratic Advantage," International Organization, Cambridge University Press, vol. 66(4), pages 709-738, October.
    5. Barseghyan, Levon & Battaglini, Marco & Coate, Stephen, 2013. "Fiscal policy over the real business cycle: A positive theory," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2223-2265.
    6. Ida Bastiaens & Nita Rudra, 2016. "Trade liberalization and the challenges of revenue mobilization: can international financial institutions make a difference?," Review of International Political Economy, Taylor & Francis Journals, vol. 23(2), pages 261-289, April.
    7. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, June.
    8. Campello,Daniela, 2015. "The Politics of Market Discipline in Latin America," Cambridge Books, Cambridge University Press, number 9781107039254, June.
    9. Matthew DiGiuseppe & Patrick E. Shea, 2016. "Borrowed Time: Sovereign Finance, Regime Type, and Leader Survival," Economics and Politics, Wiley Blackwell, vol. 28(3), pages 342-367, November.
    10. Williams, Andrew, 2015. "A global index of information transparency and accountability," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 804-824.
    11. Bernhard,William & Leblang,David, 2006. "Democratic Processes and Financial Markets," Cambridge Books, Cambridge University Press, number 9780521861229, June.
    12. Bernhard,William & Leblang,David, 2006. "Democratic Processes and Financial Markets," Cambridge Books, Cambridge University Press, number 9780521678384, June.
    13. Copelovitch,Mark S., 2010. "The International Monetary Fund in the Global Economy," Cambridge Books, Cambridge University Press, number 9780521143585, June.
    14. Copelovitch,Mark S., 2010. "The International Monetary Fund in the Global Economy," Cambridge Books, Cambridge University Press, number 9780521194334, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:rza:ersawp:822 is not listed on IDEAS
    2. repec:rza:ersawp:v::y:2020:i::id:109 is not listed on IDEAS
    3. Brooks, Sarah M. & Cunha, Raphael & Mosley, Layna, 2026. "Financial Markets and Mass Political Attitudes: Evidence from the 2022 Brazilian Election," SocArXiv 8b5r6_v1, Center for Open Science.
    4. Cormier, Benjamin & Naqvi, Natalya, 2023. "Delegating discipline: how indexes restructured the political economy of sovereign bond markets," LSE Research Online Documents on Economics 117248, London School of Economics and Political Science, LSE Library.
    5. Randall Stone, 2013. "Informal governance in international organizations: Introduction to the special issue," The Review of International Organizations, Springer, vol. 8(2), pages 121-136, June.
    6. Ali Burak Güven, 2012. "The IMF, the World Bank, and the Global Economic Crisis: Exploring Paradigm Continuity," Development and Change, International Institute of Social Studies, vol. 43(4), pages 869-898, July.
    7. Chwieroth, Jeffrey, 2012. ""The silent revolution": how the staff exercise informal governance over IMF lending," LSE Research Online Documents on Economics 46623, London School of Economics and Political Science, LSE Library.
    8. Daoud, Adel & Reinsberg, Bernhard & Kentikelenis, Alexander E. & Stubbs, Thomas H. & King, Lawrence P., 2019. "The International Monetary Fund’s interventions in food and agriculture: An analysis of loans and conditions," Food Policy, Elsevier, vol. 83(C), pages 204-218.
    9. Muhammet Bas & Randall Stone, 2014. "Adverse selection and growth under IMF programs," The Review of International Organizations, Springer, vol. 9(1), pages 1-28, March.
    10. Stephanie J. Rickard & Teri L. Caraway, 2019. "International demands for austerity: Examining the impact of the IMF on the public sector," The Review of International Organizations, Springer, vol. 14(1), pages 35-57, March.
    11. Thomas Stubbs & Bernhard Reinsberg & Alexander Kentikelenis & Lawrence King, 2020. "How to evaluate the effects of IMF conditionality," The Review of International Organizations, Springer, vol. 15(1), pages 29-73, January.
    12. Tunçer, Ali Coşkun & Weller, Leonardo, 2022. "Democracy, autocracy, and sovereign debt: How polity influenced country risk on the peripheries of the global economy, 1870–1913," Explorations in Economic History, Elsevier, vol. 85(C).
    13. Mark Copelovitch, 2014. "Michael Breen. 2013. The politics of IMF lending (New York: Palgrave MacMillan)," The Review of International Organizations, Springer, vol. 9(1), pages 125-130, March.
    14. William N. Kring & Kevin P. Gallagher, 2019. "Strengthening the Foundations? Alternative Institutions for Finance and Development," Development and Change, International Institute of Social Studies, vol. 50(1), pages 3-23, January.
    15. Daniel Carnahan & Sebastian Saiegh, 2021. "Electoral uncertainty and financial volatility: Evidence from two‐round presidential races in emerging markets," Economics and Politics, Wiley Blackwell, vol. 33(1), pages 109-132, March.
    16. Daniel McDowell, 2017. "Need for speed: The lending responsiveness of the IMF," The Review of International Organizations, Springer, vol. 12(1), pages 39-73, March.
    17. Cottiero, Christina & Schneider, Christina J, 2025. "International Financial Institutions and the Promotion of Autocratic Resilience," Institute on Global Conflict and Cooperation, Working Paper Series qt63z4m8qw, Institute on Global Conflict and Cooperation, University of California.
    18. Layna Mosley & Victoria Paniagua & Erik Wibbels, 2020. "Moving markets? Government bond investors and microeconomic policy changes," Economics and Politics, Wiley Blackwell, vol. 32(2), pages 197-249, July.
    19. Opitz, Alexander, 2015. "Democratic prospects in Imperial Russia: The revolution of 1905 and the political stock market," Hohenheim Discussion Papers in Business, Economics and Social Sciences 15-2015, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    20. Liam Clegg, 2012. "Global governance behind closed doors: The IMF boardroom, the Enhanced Structural Adjustment Facility, and the intersection of material power and norm stabilisation in global politics," The Review of International Organizations, Springer, vol. 7(3), pages 285-308, September.
    21. Betz, Timm & Pond, Amy, 2023. "Democratic institutions and regulatory privileges for government debt," European Journal of Political Economy, Elsevier, vol. 79(C).
    22. Manuel Becker & Thomas Dörfler & Thomas Gehring, 2018. "Credible commitment without independent regulatory agent: Evidence from the Security Council's United Nations Compensation Commission," Regulation & Governance, John Wiley & Sons, vol. 12(3), pages 395-412, September.

    More about this item

    Keywords

    ;
    ;

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rza:ersawp:109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Maggi Sigg (email available below). General contact details of provider: https://ersawps.org/index.php/working-paper-series/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.