Does compliance matter? Assessing the relationship between sovereign risk and compliance with international monetary law

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7 Scopus citations

Abstract

An important theory of international cooperation asserts that governments comply with international law because of the reputational costs incurred by reneging on public agreements. Countries that sign binding international agreements in the realm of monetary relations signal their commitment to an open economic system, which should reassure international market actors that the government is committed to sound economic policies. If the theory is correct, we should observe evidence that noncompliance is in fact costly. I test this argument by examining the effect of noncompliance with Article VIII of the IMF's Articles of Agreement on sovereign risk ratings. The results show that noncompliance with the agreement mitigates any benefits that accrue to Article VIII signatories. The empirical evidence suggests that, in addition to improving economic and political conditions at home, governments in the developing world would improve their access to financial markets by signing and complying with international monetary agreements.

Original languageEnglish (US)
Pages (from-to)107-139
Number of pages33
JournalReview of International Organizations
Volume5
Issue number2
DOIs
StatePublished - Jun 2010

Keywords

  • Compliance with international law
  • Sovereign risk
  • The International Monetary Fund

ASJC Scopus subject areas

  • Economics and Econometrics
  • Political Science and International Relations

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