If governments choose economic policies that often run counter to their public commitments, are those commitments meaningless? We argue that government proclamations can be critical in signaling economic policy intentions. We focus on the realm of exchange rate policy, in which countries frequently implement an exchange rate regime that differs from the officially declared regime. We argue that the official exchange rate regime is one of the most important signals of a government's economic policy preferences. When a government makes a de jure public commitment to a fixed exchange rate, it sends a signal to domestic and international markets of its strict monetary-policy priorities. In contrast, a government that proclaims a floating exchange rate signals a desire to retain discretion over monetary policy, even if it has implemented a de facto fixed rate. We use data on 110 developed and developing countries from 1974 to 2004 to test two hypotheses: first, that governments that adopt de facto fixed exchange rates will experience less inflation when they back up their actions with official declarations; and second, that governments that abide by their commitments—as demonstrated by a history of following through on their public declarations of a fixed exchange rate regime—will establish greater inflation-fighting credibility. Within developing countries, democratic institutions enhance this credibility. Results from fixed-effects econometric models provide strong support for our hypotheses.

Oil-exporting states, or petrostates, engage in militarized interstate disputes (MIDs) at a much higher rate on average than nonpetrostates. Why is this so? Further, what explains the variation among the petrostates in adopting aggressive foreign policies and engaging in MIDs on that basis? This article develops a theory that proposes that revolutionary petrostates have a higher propensity to launch MIDs than comparable nonpetrostates. This theory is tested with statistical analysis using a new quantitative data set that identifies revolutionary governments in the period 1945–2001. The results show that petro-revolutionary governments constitute a special threat to international peace and security. This evidence of resource-backed aggression challenges the conventional view of petrostates as the targets of international competition for resources.

This article shows that the opportunity costs resulting from economic interdependence decrease the probability of war in an incomplete information game. This result is strongly consistent with existing empirical analyses of the inverse trade-conflict relationship but is the opposite of the conclusion reached by Gartzke, Li, and Boehmer, who reject the opportunity cost argument in a game-theoretic framework. As a result of our findings, one cannot dismiss the opportunity cost argument as the explanation why trading nations fight less. Instead our study reaffirms the central position of opportunity costs as the basis for the inverse trade-conflict relationship, thus implying that one need not rely on signaling.

This research note examines whether trade competition abets regulatory races in the environmental area. To analyze trade competition, we develop a new measure, structural equivalence, which assesses competitive threats that a country faces from other countries whose firms export the same products to the same destination countries. Employing this new measure, we analyze air pollution intensity (sulfur dioxide or SO2) and water pollution intensity (biochemical oxygen demand or BOD) for a panel of 140 countries for the time period 1980–2003. We find that trade competition is a significant predictor of water pollution intensity among structurally equivalent countries. We then test separately whether trade competition abets upward and downward regulatory races. We find that in the case of water pollution, countries respond symmetrically to downward and upward races, that is, they follow their structurally equivalent competitor countries both when they ratchet down their regulations and when they ratchet up regulations. In the case of air pollution, however, countries are responsive to downward policy changes only in competitor countries.

Political units often spatially depend in their policy choices on other units. This also holds in dyadic settings where, as in much of international relations research, analysis focuses on the interaction or relation between a pair or dyad of two political units. Yet, with few exceptions, social scientists have analyzed contagion in monadic datasets only, consisting of individual political units. This article categorizes all possible forms of spatial effect modeling in both undirected and directed dyadic data, where it is possible to distinguish the source and the target of interaction (for example, exporter/importer, aggressor/victim, and so on). This approach enables scholars to formulate and test novel mechanisms of contagion, thus ideally paving the way for studies analyzing spatial dependence between dyads of political units. To illustrate the modeling flexibility gained from an understanding of the full set of specification options for spatial effects in dyadic data, we examine the diffusion of bilateral investment treaties between developed and developing countries, building and extending on Elkins, Guzman, and Simmons's 2006 study. However, we come to different conclusions about the channels through which bilateral investment treaties diffuse. Rather than a capital-importing country being influenced by the total number of BITs signed by other capital importers, as modeled in their original article, we find that a capital-importing country is more likely to sign a BIT with a capital exporter only if other competing capital importers have signed BITs with this very same capital exporter. Similarly, other capital exporters' BITs with a specific capital importer influence an exporter's incentive to agree on a BIT with the very same capital importer.

Previous studies that have explored the effects of economic liberalization on civil war have employed aggregate measures of openness and have failed to account for potential endogeneity bias. In this research note, we suggest two improvements to the study of the relationship between liberalization and civil war. First, emphasizing that it is processes that systematically create new economic winners and losers rather than particular levels of economic openness that have the potential to generate conflict, we consider the effects of one oft-used means of liberalizing economies: the adoption by countries of International Monetary Fund (IMF) structural adjustment programs. Second, we use a bivariate probit model to address issues of endogeneity bias. Analyzing all data available for the period between 1970 and 1999, we identify an association between the adoption of IMF programs and the onset of civil war. This finding suggests that IMF programs to promote economic openness unintentionally may be creating an environment conducive to domestic conflict.

Cross-border cooperation among domestic regulators and public officials has become a defining feature of global governance. While a number of studies have tracked the emergence and institutionalization of such transgovernmental networks, less is known about their effect on domestic policy. This study explores this link for the important case of insider-trading regulation in original data for 116 countries between 1977 and 2006. It offers quantitative evidence that transgovernmental cooperation is related to domestic policy convergence but that the relationship is more complex than often assumed. Direct ties to powerful regulators increases a jurisdiction's likelihood of adopting internationally promoted policies such as insider-trading rules. Separately, membership in the International Organization of Securities Commissions (IOSCO), a forum designed to diffuse best practices among regulators, increases a jurisdiction's likelihood of subsequently enforcing newly adopted policies. The findings in this study suggest that different network components are associated with distinct aspects of domestic policy convergence. The results are directly relevant for current public policy debates about the reregulation of global financial markets as transgovernmental networks among domestic regulators have assumed a critical role.

Analyses of monetary policy posit that exchange-rate pegs, inflation targets, and central bank independence can help anchor private-sector inflation expectations. Yet there are few direct tests of this argument. We offer cross-national, micro-level evidence on the effectiveness of monetary anchors in controlling private-sector inflation concerns. Using firm-level data from eighty-one countries (approximately 10,000 firms), we find evidence that “international” anchors (exchange-rate commitments) correlate significantly with a substantial reduction in private-sector concerns about inflation while “domestic” anchors (inflation targeting and central bank independence) do not. Our conjecture is that private-sector inflation expectations are more responsive to exchange-rate anchors because they are more transparent, more constraining, and more costly than domestic anchoring arrangements.

A core proposition from decades of research on internal wars asserts that democracies, with their casualty-averse publics, accountable leaders, and free media, are uniquely prone to losing counterinsurgency (COIN) wars. Yet one should question this finding, for two reasons. First, existing studies overwhelmingly adopt no-variance research designs that only examine democracies, leaving them unable to assess their performance relative to autocracies. Second, these studies do not control for confounding factors that bias causal estimates. Democracies, for example, typically fight wars of choice as external occupiers, while most autocracies face homegrown insurgencies, a function in part of divergent levels of state capacity possessed by democratic and autocratic combatants. This study corrects for both problems using a new dataset of insurgencies (1800–2005) and matching to test whether democracies experience significantly higher rates of defeat and shorter wars. No relationship between democracy and war outcomes or duration is found once regime type is varied and inferential threats are addressed.