Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-13T05:40:35.443Z Has data issue: false hasContentIssue false
  • English
  • Français

Global Capital Cycles and Market Discipline: Perceptions of Developing-Country Borrowers

Published online by Cambridge University Press:  28 September 2021

Alexandra O. Zeitz Open the ORCID record for Alexandra O. Zeitz [Opens in a new window]
Alexandra O. Zeitz*
Affiliation:
Department of Political Science, Concordia University, Montréal, Canada
*
Corresponding author. Email: alexandra.zeitz@concordia.ca
Get access Rights & Permissions [Opens in a new window]

Abstract

Developing countries are often thought to be particularly exposed to the constraints of global markets. Facing scrutiny from foreign investors, why do developing-country governments enter international bond markets, especially when they can access cheaper finance from international financial institutions? I argue that borrowing governments' perception of market constraints depends on global liquidity. When bond markets are highly liquid, investors become more risk acceptant and governments perceive the political costs of borrowing to be lower, especially compared to the conditionality of concessional loans. I use data on the timing of bond issues and three case studies—Ethiopia, Ghana, and Kenya—to demonstrate that choices to issue debt were shaped by global liquidity. These findings nuance debates about how markets constrain governments, emphasizing that market constraints are conditional on systemic factors, including, global liquidity.

Keywords

government debtglobal capital cyclesgovernment autonomysub-Saharan Africacapital markets
Type
Letter
Information
British Journal of Political Science , Volume 52 , Issue 4 , October 2022 , pp. 1944 - 1953
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ahlquist, JS (2006) Economic policy, institutions, and capital flows: portfolio and direct investment flows in developing countries. International Studies Quarterly 50(3), 681–704.CrossRefGoogle Scholar
Arias, E (2018) Patronage by Credit: International Sources of Patronage Politics. Paper presented at the International Political Economy Society Conference.Google Scholar
Arias, E, Mosley, L, and Rosendorff, BP (2019) Government Choices across Borrowing Strategies. Paper presented at the American Political Science Association Conference.Google Scholar
Ballard-Rosa, C., Mosley, L., & Wellhausen, R. (2021). Contingent Advantage? Sovereign Borrowing, Democratic Institutions and Global Capital Cycles. British Journal of Political Science, 51(1), 353–373.CrossRefGoogle Scholar
Bauerle Danzman, S, Winecoff, WK, and Oatley, T (2017) All crises are global: capital cycles in an imbalanced international political economy. International Studies Quarterly 61(4), 907–923.CrossRefGoogle Scholar
Betz, T and Kerner, A (2015) The influence of interest: real US interest rates and bilateral investment treaties. The Review of International Organizations 11(4), 419–448.CrossRefGoogle Scholar
Blas, J (2014) Investors pile into Ethiopia's $1bn debut debt sale. Financial Times. December 4, 2014.Google Scholar
Bodea, C and Hicks, R (2015) International finance and central bank independence: institutional diffusion and the flow and cost of capital. The Journal of Politics 77(1), 268–284.CrossRefGoogle Scholar
Bunte, JB (2018) Sovereign lending after debt relief. Review of International Political Economy 25(3), 317–339.CrossRefGoogle Scholar
Bunte, JB (2019) Raise the Debt: How Developing Countries Choose Their Creditors. New York, N.Y.: Oxford University Press.CrossRefGoogle Scholar
Clark, R and Dolan, LR (2021) Pleasing the principal: U.S. influence in World Bank policymaking. American Journal of Political Science 65, 36–51.CrossRefGoogle Scholar
Clark, WR and Hallerberg, M (2000) Mobile capital, domestic institutions, and electorally induced monetary and fiscal policy. American Political Science Review 94(2), 323–346.CrossRefGoogle Scholar
Cormier, B (2020) Interests over institutions: political-economic constraints on public debt management in developing countries. Governance, 1–25. doi: 10.1111/gove.12551.Google Scholar
Drezner, DW (2001) Globalization and policy convergence. International Studies Review 3(1), 53–78.CrossRefGoogle Scholar
Garrett, G (1998) Global markets and national politics: collision course or virtuous circle? International Organization 52(4), 787–824.CrossRefGoogle Scholar
Garriga, AC (2016) Central bank independence in the world: a new data set. International Interactions 42(5), 849–868.CrossRefGoogle Scholar
Hollyer, JR, Rosendorff, BP, and Vreeland, JR (2015) Transparency, protest, and autocratic instability. American Political Science Review 109(4), 764–784.CrossRefGoogle Scholar
Horn, S, Reinhart, C, and Trebesch, C (2019) China's Overseas Lending. Kiel Working Paper.CrossRefGoogle Scholar
Ilzetzki, E, Reinhart, CM, and Rogoff, KS (2019) Exchange arrangements entering the twenty-first century: which anchor will hold? The Quarterly Journal of Economics 134(2), 599–646.CrossRefGoogle Scholar
Kindleberger, C (1978) Manias, Panics and Crashes: A History of Financial Crises. Basic Books. Basingstoke: Palgrave Macmillan.CrossRefGoogle Scholar
MacCarthy, M (2016) Mobilizing and Managing External Development Assistance for Inclusive Growth: Ghana Country Report. Technical Report. Accra, Ghana: African Center for Economic Transformation.Google Scholar
Manson, K and Blas, J (2014) Kenya launches $2bn debut bond roadshow. Financial Times. June 4, 2014.Google Scholar
Maxfield, S (1998) Understanding the political implications of financial internationalization in emerging market countries. World Development 26(7), 1201–1219.CrossRefGoogle Scholar
Minsky, HP (1977) A theory of systemic fragility. In Altman, ED and Sametz, AW (eds), Financial Crises: Institutions and Markets in A Fragile Environment. Nashville, TN: John Wiley/Sons, pp. 138–152.Google Scholar
Mosley, L (2000) Room to move: international financial markets and national welfare states. International Organization 54(4), 737–773.CrossRefGoogle Scholar
Mosley, L (2003) Global Capital and National Governments. Cambridge: Cambridge University Press.Google Scholar
Mosley, L, Paniagua, V, and Wibbels, E (2020) Moving markets? Government bond investors and microeconomic policy changes. Economics & Politics 32(2), 197–249.CrossRefGoogle Scholar
Naqvi, N (2019) Manias, panics and crashes in emerging markets: an empirical investigation of the post-2008 crisis period. New Political Economy 24(6), 759–779.CrossRefGoogle Scholar
Oatley, T (1999) How constraining is capital mobility? The partisan hypothesis in an open economy. American Journal of Political Science 43(4), 1003.Google Scholar
Stone, RW (2004) The political economy of IMF lending in Africa. American Political Science Review 98(4), 577–591.CrossRefGoogle Scholar
Tomz, M (2007) Reputation and International Cooperation: Sovereign Debt Across Three Centuries. Princeton, NJ, and Oxford: Princeton University Press.Google Scholar
Wibbels, E (2006) Dependency revisited: international markets, business cycles, and social spending in the developing world. International Organization 60(2), 433–468.CrossRefGoogle Scholar
Zeitz, A (2021) Replication Data for: Global capital cycles and market discipline: perceptions of developing country borrowers. https://doi.org/10.7910/DVN/BJY2HW, Harvard Dataverse, V1, UNF:6:8aMjQjHAPgTg8G7ZWBVvpQ== [fileUNF].Google Scholar
Supplementary material: Link

Zeitz Dataset

Dataset

https://doi.org/10.7910/DVN/BJY2HW
Link