Ana Carolina Garriga

Foreign Aid as a Signal to Investors: Predicting FDI in Post-Conflict Countries

Does development aid attract foreign direct investment (FDI) in post-conflict countries? This article contributes to the growing literature on effects of aid and on determinants of FDI by explaining how development aid in low-information environments is a signal that can attract investment. Before investing abroad, firms seek data on potential host countries. In post-conflict countries, reliable information is poor, in part because governments face unusual incentives to misrepresent information. In these conditions, firms look to signals. One is development aid, because donors tend to give more to countries they trust to properly handle the funds. Our results show that aid seems to draw FDI—however, this is conditional on whether the aid can be considered geostrategically motivated. We also show that this effect decreases as time elapses after the conflict. This suggests that aid’s signaling effect is specific to low-information environments, and helps rule out alternative causal mechanisms linking aid and FDI.

Central Bank Independence in the World: A New Data Set

ABSTRACT This article introduces the most comprehensive dataset on de jure central bank independence (CBI), including yearly data from 182 countries between 1970 and 2012. The dataset identifies statutory reforms affecting CBI, their direction, and the attributes necessary to build the Cukierman, Webb and Neyapty index. Previous datasets focused on developed countries, and included non-representative samples of developing countries. This dataset’s substantially broader coverage has important implications. First, it challenges the conventional wisdom about central bank reforms in the world, revealing CBI increases and restrictions in decades and regions previously considered barely affected by reforms. Second, the inclusion of almost 100 countries usually overlooked in previous studies suggests that the sample selection may have substantially affected results. Simple analyses show that the associations between CBI and inflation, unemployment or growth are very sensitive to sample selection. Finally, the dataset identifies numerous CBI decreases (restrictions), whereas previous datasets mostly look at CBI increases. These data’s coverage not only allows researchers to test competing explanations of the determinants and effects of CBI in a global sample, but it also provides a useful instrument for cross-national studies in diverse fields, such as liberalization, diffusion, political institutions, democratization, or responses to financial crises.

Regime Type and Bilateral Treaty Formalization: Do Too Many Cooks Spoil the Soup?

How does domestic regime type affect bilateral cooperation, and one of its most visible manifestations, bilateral treaties? This article explains how domestic political regime affects bilateral cooperation and, contrary to the expectations of some scholars, why autocracies should be expected to be more likely than democracies to enter into bilateral treaties. If the preferences of a pair of states are not identical, the sets of agreements that each party would consent to (win-sets) need to overlap for a bilateral treaty to be acceptable. Because additional domestic constraints reduce the size of a country’s win-set, autocracies should have broader win-sets than democracies. Therefore, autocratic dyads should be more likely to formalize bilateral treaties than other pairs of states. Based on an original data set, I present empirical evidence showing that pairs of autocracies are more likely than other pairs of states to enter into agreements formalizing bilateral cooperation.

Monetary Constraints, Spending, and Autocratic Survival in Party-Based Regimes

In dominant party regimes, party cadres’ participation in decision-making constrains dictators from arbitrarily changing policy. Party based regimes are also better at mobilizing supporters in exchange for extensive patronage. The conventional wisdom is that these two mechanisms work together to prolong dominant party regimes. However, under certain conditions, the elite-level constraints restrict autocratic leaders’ ability to engage in patronage distribution. We focus on monetary institutions, arguing that when central bank independence overlaps with the collective decision-making in dominant party regimes, dictators have diminished control over the central bank. Thus the central bank is effective enough to restrict expansionary fiscal policy, reducing the mobilization of supporters through patronage and increasing authoritarian breakdown risk. Analyses on data from 1970 to 2012 in 94 autocracies find that high central bank independence in dominant party regimes increases the likelihood of breakdown. Moreover, independent central banks in party-based autocracies contribute to lower fiscal expenditures.

Other Forms of Punishment of Human Rights Violations: The Case of Foreign Direct Investment

Human rights protection mechanisms are based on the state’s commitment to respect, protect and/or promote a series of rights. When one speaks about human rights violations’ punishments, the first image that comes to mind is the execution of human rights court rulings. However, there are other less explored informal mechanisms that generate negative consequences (“punishments”) after human rights violations. There are actors who react to human rights violations in a non-coordinated but systematic way. This paper addresses the following question: Do multinational corporations punish or reward human rights violations? To answer this question, I first discuss the literature analyzing the consequences of human rights violations on foreign direct investment (FDI). Second, I examine the effect of human rights violations on FDI inflows between 2000 and 2011 and present descriptive data illustrating the past five-year trend.