Journal Articles
Indexes, Currencies, and the political economy of sovereign bond market access, with Ben Cormier
2025. International Studies Quarterly
Inclusion in bond indexes improves emerging market (EM) government access to capital. Under what conditions do EMs enter indexes and gain the market access benefits? We find that borrower features affect index inclusion differently in domestic currency versus foreign currency bond contexts. In the higher-risk domestic currency bond context, indexes are designed to include only a small, low-risk subset of bonds, leading borrower political, institutional, and policy characteristics to significantly affect inclusion probability. In the lower-risk foreign currency bond context, indexes are designed to depict more of the market, so these same borrower features do not significantly affect inclusion probability. The study shows why EM entry into indexes and the corresponding access to capital vary across domestic currency and foreign currency bond markets, providing a nuanced picture of how contemporary sovereign debt markets operate. We provide historical index inclusion data for future research.
Delegating Discipline: How indexes restructured the political economy of sovereign bond markets, with Ben Cormier
2023. Journal of Politics
Outside of the rich world, international financial markets are thought to discipline borrowing governments by monitoring political and economic characteristics. But increasingly, asset managers do not assess individual country risk/return profiles. They replicate benchmark indexes, delegating investment decisions to index providers. This has two effects. First, it relocates market discipline into the hands of index providers. Second, it alters the constraints sovereigns face when accessing bond markets, conditioning the relationship between a sovereign’s political-economic features and its ability to raise capital. Using a novel dataset of index inclusion and weights, we show country-specific factors traditionally associated with bond market access do not have the expected constraining effects on countries included in a major index, but do continue to affect excluded countries. Index investment has profoundly restructured debt markets by circumscribing the disciplinary link between country characteristics and capital allocation, with wide-ranging implications for the political economy of debt and finance.
Economic crisis, global financial cycles, and state control of finance: Public development banking in Brazil and South Africa
2022. European Journal of International Relations
In the aftermath of recent crisis, national governments across the global south increasingly see state ownership and control of finance as a vital public policy tool. What explains variation in state control of finance in the wake of crisis? Interventionist policies can elicit disinvestment or exit threats from private financial actors if they limit profitability. When disinvestment threats are credible, policymakers may rule out reform for fear of devastating economic consequences. I argue that the credibility of disinvestment threats is conditioned by two key variables, the resilience of the national economy to capital flight, which affects the level of damage capital flight will inflict, and global financial liquidity, which can be used to undercut domestic disinvestment threats. These arguments are developed through comparative case studies of cross-national and over-time variation in the scale and scope of public development banking in Brazil and South Africa in the wake of the 2008 crisis.
The structural power of finance meets financialization, with Florence Dafe, Sandy Hager and Leon Wansleben
2022. Politics and Society (Introduction to special issue)
How do we theorize and analyze the structural power of finance when global capitalism itself undergoes constant and profound structural transformation? The literature continues to assume that the source of financial structural power is its unique ability to provide credit to the real economy, playing a crucial role in meeting the investment imperative. But recent research documents that most financial market activities no longer facilitate productive investment and can even be a drag on economic development. If the financial sector's primary role is not to support productive investments, then on what basis does it continue to hold structural power? The contributions to this special issue engage with how decades of financialization have transformed the basis of structural power toward alternative functions that have gone unnoticed in the existing literature. These include household and real estate lending that fuels consumption-led growth, concentration and expansion of financial institutions as tools of geo-economic strategy, financing current account deficits that facilitate global imbalances, and wealth preservation that bolsters inequality.
Renationalising finance for development: Policy space and public economic control in Bolivia
2020. Review of International Political Economy
After years of placing faith in the markets, we are seeing a revival of interest in statist economic policy across the world, particularly with regards to finance. How much policy space do previously liberalised developing countries still have to renationalise their financial sectors by exerting direct control over the process of credit allocation, despite the constraints posed by economic globalisation? Under what conditions do they actually use this policy space? Bolivia is an especially important case because it is one of the few peripheral countries that implemented strongly interventionist financial reform in the 2010s. Using Bolivia as a least likely case, I argue that two factors, increased availability of external financing sources, and domestic popular mobilisation, create favourable conditions for developmentalist financial reform because these make it possible to reduce external conditionalities and overcome opposition by the domestic financial sector. Popular mobilisations paved the way for reform by bringing developmentalist policymakers to power and exerting pressure on them to 1. Maximise policy space by diversifying into newly available alternative sources of foreign borrowing to reduce external conditionalities, and 2. Mitigate the importance of disinvestment threats by domestic economic elites by incrementally increasing public ownership and control of the economy.
Manias, panics and crashes in emerging markets: An Empirical Investigation of the Post-2008 Crisis Period
2019. New Political Economy 24 (6), 759-779
Because of their economic importance, international bond markets are thought to be the likely location for the operation of financial market pressures on emerging market (EM) government policy. An important but unresolved debate that runs through the literature is the relative importance of domestic factors specific to the country receiving the capital flows (pull factors), versus push factors exogenous to the receiving country, in driving portfolio flows to EMs. Through extensive interviews with financial market participants, and analysis of the financial press between January 2008 and 2013, this paper argues that not only were market participants fully aware of the importance of push factors over the cycle, but that their perceptions of the domestic fundamentals themselves were influenced by these push factors. The paper provides evidence on the micro-foundations of investment decision making that make investors susceptible to influence by the push factors, and adds to a growing body of evidence that financial market borrowing costs are even less in the control of emerging market governments than previously assumed, because even when investors pay attention to domestic fundamentals, their assessments can be divorced from reality. This means that government efforts to attract foreign capital through implementing investors' preferred policies may be ultimately futile.
Kicking Away the Financial Ladder? German development banking under economic globalisation, with Anne Henow and Ha-Joon Chang
2018. Review of International Political Economy, 25 (5), 672-698
While extensive literature exists on how economic globalisation has limited developing countries' policy space for industrial policy, the literature on how it has affected advanced economies remains scant. We utilise original archival material to analyse the activities of the German public development bank, the Kreditantstalt für Wiederaufbau (KfW), in order to shed light on an important, but neglected aspect of German industrial policy. We analyse how the KfW responded to multiple challenges after the rise of economic globalisation, including a funding crisis, international agreements to limit export subsidies and Europeanisation. We argue that KfW successfully managed to navigate these challenges in order to retain, and even increase, its ability to conduct selective industrial policy in the post-1980s era. This was possible because of Germany's hard currency and low sovereign credit risk, large market size, which was augmented by membership in the European Union, and Germany's position as regional hegemon within Europe. More broadly, this shows how, conditional on domestic politics, advanced economies are able to shape and exploit the rules of the international economic system to implement industrial policies to their advantage, even as developing countries are given the opposite policy recommendations.
Finance and Industrial Policy in Unsuccessful Developmental States: The Case of Pakistan
2018. Development and Change, 49 (4), 1064-1092
While a large body of research indicates that state‐directed finance worked for successful East Asian developers, the dominant assumption remains that countries with a weak state capacity, where corruption is rife, should not ‘try this at home’. In this article, that narrative is questioned through a case study of the role of the financial sector in Pakistan, which is widely considered to be a successful case of financial liberalization, contrasting the role of the publicly controlled financial system in the 1970s and 1980s with that of the liberalized financial system in the 2000s. Utilizing archival firm‐level and aggregate data, historic government documents, and interviews with policy makers, financial sector employees and industrialists, it is argued that in the Pakistani case, the withdrawal of state control over the financial sector led to a deterioration of outcomes. This resulted in the allocation of credit away from the productive sectors, namely industry and agriculture, towards unproductive sectors, for speculative purposes; and in the health of the financial sector not improving as expected, with non‐performing loans and corruption remaining a problem, and banks actually becoming a greater burden on government finances. This indicates that even states with weak capacity and flawed industrial policy may be better off with some degree of public control over finance.
Privatization in the Land of Believers: The political economy of privatization in Pakistan, with Kamal Munir
2017. Modern Asian Studies, 51 (6), 1695-1726
Despite theoretical justifications and empirical evidence that state-owned enterprises have played an important role in late development, as well as over three decades of evidence that privatization programmes since the 1980s have had mixed results at best, international financial institutions continue prescribing privatization as a panacea for developing countries. Pakistan is an interesting case to understand why privatization is still considered desirable, because it is one of a set of developing countries that have whole-heartedly implemented Washington Consensus policies. In this context, we analyse privatization in two key economic sectors in Pakistan: energy and banking. Using qualitative and quantitative data, we describe the motivations behind these privatizations, the process by which they were carried out, and analyse the post-privatization performance of these organizations and sectors. We find that in both cases (a) the privatizations failed not only with respect to their stated aims, leading to a decline in national productive capabilities, but also had adverse distributional consequences, shifting the rewards to the buyers while the risks and costs remained with the public sector, and (b) the suboptimal outcomes of the privatizations went largely unchallenged aided by a prevalent neoliberal view amongst the country's economic policy makers and intelligentsia. Our analysis sheds new light on the process by which privatization in the absence of a state with the capacity to discipline business interests has enabled these interests to obtain state-sponsored rents without bringing any of the associated benefits for economic development.
