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Transparent motives: democratic advantage in international credit markets

Title
Transparent motives: democratic advantage in international credit markets
Authors
Kim, Yong KyunO'Neill, Daniel C.
Ewha Authors
김용균
SCOPUS Author ID
김용균scopus
Issue Date
2017
Journal Title
JOURNAL OF INTERNATIONAL RELATIONS AND DEVELOPMENT
ISSN
1408-6980JCR Link

1581-1980JCR Link
Citation
JOURNAL OF INTERNATIONAL RELATIONS AND DEVELOPMENT vol. 20, no. 1, pp. 108 - 132
Keywords
democracydeveloping countriesinternational capital marketsreputationsovereign defaulttransparency
Publisher
PALGRAVE MACMILLAN LTD
Indexed
SSCI; SCOPUS WOS
Document Type
Article
Abstract
Do democracies have an advantage in international credit markets? According to Schultz and Weingast (2003), they do, as democratic governments can be held accountable and, thus, their commitments to pay are more credible. However, this argument does not apply to much of the developing world, in which potential lenders are often not domestic and lack the ability to punish the sovereign through domestic political institutions. Saiegh (2005) argues that there is no 'democratic advantage' in developing states, as he finds developing democracies more likely to reschedule foreign debt than non-democracies. In this paper, we also find that democratic governments are more likely to default. However, we argue that this ability to reschedule loans precisely is a democratic advantage. Democratic countries are more likely to default because they can do so without fear of being punished by global credit markets; and when they do, developing democracies are also more likely to receive credit following default. The source of this democratic advantage is transparency, which makes democratic governments credible, not only in their promises to pay, but also in their claims about their ability to pay.
DOI
10.1057/jird.2015.1
Appears in Collections:
사회과학대학 > 정치외교학전공 > Journal papers
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