Working Paper: NBER ID: w13988
Authors: Andrew K. Rose; Mark M. 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 partnerships; international economic exchange; environmental treaties; reputation spillover
JEL Codes: F10; F34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Countries with lower discount rates (E43) | Participation in International Environmental Agreements (IEAs) (F53) |
| Participation in International Environmental Agreements (IEAs) (F53) | Reputation as creditworthy borrowers (G21) |
| Reputation as creditworthy borrowers (G21) | Increased lending from creditors (G21) |
| Participation in International Environmental Agreements (IEAs) (F53) | Economic exchange (D46) |
| Bilateral penalties for defaulting on debt obligations (F34) | Economic integration (F15) |
| International environmental cooperation (F64) | Economic exchange (D46) |