| ID | 165431 |
| Title Proper | Moral Hazard and Financial Crises |
| Other Title Information | Evidence from American Troop Deployments |
| Language | ENG |
| Author | Aklin, Michaël ; Michaël Aklin Andreas Kern ; Kern, Andreas |
| Summary / Abstract (Note) | Do international lenders of last resort create financial instability by generating moral hazard? The evidence is thin and plagued with measurement error. We use the number of American troops hosted by third countries to measure the strength of American commitment to ensuring the countries’ economic health. We test several hypotheses against a dataset covering about sixty-eight countries between 1960 and 2009. Using evidence from fixed-effects and instrumental-variable models, we find that increasing the number of US troops by one standard deviation above the mean raises the probability of a financial crisis in the host country by up to 13 percentage points. We also investigate the channels through which moral hazard materializes. Countries with more US troops conduct more expansionary fiscal and monetary policies, implement riskier financial regulations, and receive more capital, especially from US banks. While many scholars of international relations view the American overseas military presence as a source of stability, we identify an underexplored mechanism by which it generates instability. |
| `In' analytical Note | International Studies Quarterly Vol. 63, No.1; Mar 2019: p.15–29 |
| Journal Source | International Studies Quarterly Vol: 63 No 1 |
| Key Words | Financial Crises ; Moral hazard ; American Troop Deployments |