Working Paper: CEPR ID: DP5942
Authors: Andrew K. Rose; Mark Spiegel
Abstract: We examine the role of non-economic partnerships in promoting international economic exchange. Since far-sighted countries are more willing to join costly international partnerships such as environmental treaties, environmental engagement tends to encourage international lending. Countries with such non-economic partnerships also find it easier to engage in economic exchanges since they face the possibility that debt default might also spill over to hinder their non-economic relationships. We present a theoretical model of these ideas, and then verify their empirical importance using a bilateral cross-section of data on international cross-holdings of assets and environmental treaties. Our results support the notion that international environmental cooperation facilitates economic exchange.
Keywords: noneconomic engagement; international exchange; environmental treaties; partnership; reputation; theory
JEL Codes: F02; F10; F34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Participation in IEAs (F53) | International economic exchange (F02) |
| Participation in IEAs (F53) | Creditworthiness (F34) |
| Creditworthiness (F34) | Increased lending (G21) |
| Default on debt obligations (G33) | Reduced cooperation in environmental treaties (F64) |
| Reduced cooperation in environmental treaties (F64) | Economic relations (F59) |