Coordinated Financial Rescues

• In Event: Sources of Destabilization in Europe

Abstract

The paper analyzes the politics of coordinated international financial rescues. We argue that the strategies and decisions of official and private creditors to address financial crises are highly contingent on each other. The more other creditors are willing to lend or to forgive, the lower are the perceived risks of lending, which unlocks more financing from other creditors. And even though the IMF is not always the central actor with respect to loan size, its unique ability to impose and monitor policy conditionality provides important signals to other creditor groups. We use a stochastic actor-oriented model to analyze how networks of financial rescue strategies co-evolve over time. Our results, while preliminary, support our expectations that increases in financial support in one network are strongly related to support in other networks.

Authors

• Christina J. Schneider, University of California, San Diego

• Jennifer L Tobin, Georgetown University

• Paasha Mahdavi, University of California, Santa Barbara