Reputation and international cooperation sovereign debt across three centuries

REPUTATION AND INTERNATIONAL COOPERATION REPUTATION AND INTERNATIONAL COOPERATION S O V E R E I G N D E B T AC R O S S THREE CENTURIES Michael Tomz PRINCETON UNIVERSITY PRESS PRINCETON AND OXFORD Copyright © 2007 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, Market Place, Woodstock, Oxfordshire OX20 1SY All Rights Reserved Library of Congress Cataloging-in-Publication Data Tomz, Michael Reputation and international cooperation : sovereign debt across three centuries / Michael Tomz p cm Includes bibliographical references and index ISBN-13: 978-0-691-12930-3 (cloth : alk paper) ISBN-13: 978-0-691-12469-7 (pbk : alk paper) Debts, External—History Debtor and creditor—History I Title HG3891.5.T66 2007 336.3'43509——dc22 2007005573 British Library Cataloging-in-Publication Data is available This book has been composed in Sabon Printed on acid-free paper ∞ press.princeton.edu Printed in the United States of America 10 To Julie, Emily, Anna, and David Contents List of Tables ix List of Figures xi Preface xiii PART ONE: THEORY Chapter The Puzzle of Cooperation in International Debt Chapter A Theory of Cooperation through Reputation 14 PART TWO: EVIDENCE 37 Chapter Reputations of New and Seasoned Borrowers 39 Chapter Reputation in Expert Opinion 70 Chapter Reputations during Good Times and Bad 86 Chapter Enforcement by Gunboats 114 Chapter Enforcement through Trade Sanctions 158 Chapter Enforcement through Collective Retaliation 196 PART THREE: IMPLICATIONS 221 Chapter Reputation and Cooperation under Anarchy 223 Bibliography 243 Index 275 Tables 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4.1 5.1 5.2 5.3 5.4 5.5 5.6 6.1 6.2 6.3 6.4 6.5 6.6 6.7 Bond Yields of Seasoned and New Borrowers, Amsterdam, 1771 Bond Yields of Seasoned and New Borrowers, Amsterdam, 1783 Bond Yields of Seasoned and New Borrowers, London, 1824–25 Bond Yields of Four Types of Borrowers, London, 1872 Regression Analysis of Bond Yields, London, 1872 Regression Analysis of Bond Yields of Settlers, London, 1872 Regression Analysis of Bond Yields of New Borrowers, London, 1872 References to Reputation, Military Intervention, and Trade Sanctions in Expert Texts, 1919–29 Relationship between Credit History and New Borrowing in the 1920s Regression Analysis of Bond Yields in 1928 Relationship between Credit History and New Borrowing in the 1930s Bond Yields of Countries That Repaid and Reborrowed, 1931–33 Argentina’s Debt Conversion, 1934–37 Australia’s Debt Conversion, 1932–37 Countries in the Gunboat Sample, 1820–1913 Military Action by Creditors against Debtors, 1820–1913 Logit Analysis of Militarized Interstate Disputes, 1820–1913 Military Action by Each Creditor against Debtors, 1820–1913 Analysis of Militarized Interstate Disputes That Coincided with Debt Default, 1820–1913 British Refusal to Apply Pressure in Diplomatic Correspondence, 1823–53 Foreign Bond Listings in Belgium, the Netherlands, and Switzerland, 1820–1913 42 44 49 59–60 63 66 67 75 88 92 101 103 107 110 120–121 122 124 125 128–131 145 149 INDEX 121–33, 153–57; military power and, 147–52; religion and, 127, 129t, 130t, 132; synopsis of evidence, 35, 232; territorial disputes and, 132; timing of, 125– 27; tort claims and, 132 See also specific country; Venezuelan crisis of 1902 Gurr, Ted Robert, 123n26 Guthrie, Wayne Lee, 141nn64,65, 142n68 Guzman, Andrew T., 239n22 Guzma´n Blanco, Antonio, 151n89 Haas, Ernst B., 7n12 Haggard, Stephan, 200n17 Haggard, William H D., 137nn49,50, 138n52 Hague Peace Conference of 1907, 7, 152 Haiti: borrowing by, 88t, 101t, 149t; compliance vs default by, 88t, 98f, 101t, 102, 189n73; gunboat diplomacy and, 120t, 149t; trade sanctions and, 180n63; U.S marines and, 102 Hallak, Issam, 214n48 Hallinan, Charles T., 74n3, 75t Hambro, Charles Jocelyn, 167n31, 170n40 Hamburg, 40n1, 118, 149t Hamburg Board of Trade, 142 Hamilton, Alexander, 45 Hammond, Edmund, 136n44 Hannell, David, 154 Hanotaux, Gabriel, 155 Hanover, 120t, 149t Hansen, Bent, 179n61 Hansen, Svend Aage, 179n61 hard times See bad times Hargis, Kent, 115n6 Harrell, Frank E., 123n27 Hasbrouck, Alfred, 52n25 Hawes, Michael Brewster, 235n15 Hay, John, 134n37 Helleiner, Eric, 200n17 Hellwig, Martin, 6n11 Helpa Constitution, 155 Herrerı´a, Vizconde de la, 41, 42t, 43 Herschel, Arthur Hobart, 74n3, 75t, 80n19 Herwig, Holger H., 141n65, 142nn67,69 Herzegovina, 156 Hesse Electoral, 120t, 149t Hesse Gran Ducal, 120t, 149t Hilaire, Max, 115n3 Hjerppe, Riitta, 179n61 Hobbes, Thomas, xiii 285 Hobson, C K., 115–16 Hogan, Albert E., 154 Holden, Steinar, 239n22 Honaker, James, 62n47 Honduras: bond yields of, 59t; borrowing by, 50, 54f, 59t, 88t, 101t, 149t; compliance vs default by, 54f, 58, 59t, 87, 88t, 98f, 101t, 126f; gunboat diplomacy and, 120t, 126f, 127, 129t, 149t, 155–56; new vs seasoned borrowers and, 59t; Poyaisian fraud and, 51; trade sanctions and, 191t Honduras Packet (ship), 53 Hope & Co., 47 Hopf, Ted, 240n25 Hopkins, A G., 133n35 Hopkins, Daniel J., 239n22 Horn, Nico van, 40 House of Lords, 55 House of Tokugawa, 68 Hueyo, Alberto, 107n41, 175–77 Huizinga, Harry, 200n17 Hull, Cordell, 188 human rights, 3, Humes, Brian D., 227n3 Hungary: borrowing by, 88t, 101t; compliance vs default by, 88t, 98f, 101t, 184t; new vs seasoned borrowers and, 89–90, 92; trade sanctions and, 180n63, 184t, 191t See also Austria Husain, Aasim M., 16n1 Huth, Paul K., 240 Huttenback, Robert A., 153n91 Hutton, William Holden, 156 hypotheses: collective retaliation and, 196, 197–201, 209, 212, 215–16; current calculus theory and, 30–32, 43n10; desirebased theory and, 29–30; gunboat diplomacy and, 7–9, 33, 70, 114–16, 122, 134–35, 138–39, 144, 147, 151–52; reputation theory and, 14, 17–20, 22– 25, 27–29, 33–35, 39, 49, 51, 53, 66– 67, 70, 79, 85–86, 90, 100, 102–4, 224–27; trade sanctions and, 8–9, 33, 70, 158–66, 170, 175–76, 178, 182, 186, 190, 194 Iberian Peninsula, 143 implicit deterrence policy, 147–51 incomplete information: biased learning and, 18, 29–30, 230; complete information and, 10–11; credit history and, 78– 286 incomplete information (cont.) 79; eighteenth century and, 40, 46, 60; expert opinions and, 70–85; Keohane and, xiii; nineteenth century and, 48, 50–51, 53, 60, 69; Poyais and, 50–53; rating firms and, 78–79; reputation theory and, 10–11, 14–20, 22, 31, 224–27 India, 206n27 information See complete information; incomplete information Institute of Export, 84 Institute of International Finance, 79, 168n33, 169n36 interest rates: Amsterdam market and, 40–47; bank loans vs bonds and, 214; collective action clauses and, 236; collective retaliation and, 6, 196, 212–19; commissions and fees and, 42, 214, 217–18; compliance measures and, 95– 96, 178, 183; credit rationing and, 24– 25; current calculus theory and, 32; data sources, 41, 43, 46f, 49t, 52f, 56f, 60t, 68f, 90, 107t, 110t; desire-based theory and, 30; dollar vs sterling bonds and, 164–66, 183, 184t, 186–87; fixed vs floating, 214; gunboat diplomacy and, 33; international, 16, 214, 225; issue linkage and, 33, 212; London interbank offered rate (LIBOR) and, 214, 217; long run and, 201, 203f; maturities and, 218; new vs seasoned borrowers and, 19–20, 27–28, 34, 39, 41–47, 50–52, 55–69, 90–92, 225, 228, 231–32 (see also new vs seasoned borrowers); perverse effects of, 24; Poyais fraud and, 50–53; real (price-adjusted) interest rates, 201, 203f; regulations and, 204–5, 214; repeat play and, 5–6; reputation theory and, 24–26, 30, 225, 227 (see also reputation theory); risk and, 24, 26, 41, 51, 227; settlement payments and, 58– 60, 62–64, 66, 90–92, 226, 228; surprising payers and, 34–35, 102–12 (see also surprising payers); syndicates and, 216– 19; tax loopholes and, 205–9, 214; trade sanctions and, 33; trigger strategies and, 5–6; U.S Treasury bills, 214; yield defined, 41 See also specific country Internal Revenue Service (IRS), 206, 207n32, 208–9 International Committee of Peruvian Bondholders, 192 INDEX International Lending Supervision Act, 204–5 International Monetary Fund (IMF), 206, 233–35, 236n18 interwar period, 34–35, 71–83, 86–113, 160–90, 193–94, 203f, 227–29, 232 intrinsic sanctions, See also repeat play Investment Bankers Association of America, 71–72, 79 Investment Principles and Practices (Badger), 72 investors See lenders Iran (Persia), 88t, 89, 99f, 101t, 120t, 180n63 Ireland: borrowing by, 88t, 101t; compliance vs default by, 88t, 98f, 101t, 189n73; foreign investment by, 101; new vs seasoned borrowers and, 89, 92; trade sanctions and, 180n63 Ireland, Gordon, 157 Irwin, Douglas A., 24n11 issue linkage, 4, 7–9, 32–35; collective retaliation and, 199, 215–16, 218–19 (see also collective retaliation); expert opinion and, 70–85, 151, 182, 193; gunboat diplomacy and, 7–8, 35, 114–57, 232 (see also gunboat diplomacy); synopsis of evidence, 35–36, 84–85, 152–53, 195, 218–19, 232–33; trade sanctions and, 8– 9, 35–36, 158–95, 199, 232–33 (see also trade sanctions) Italy: bond yields of, 59t, 64; borrowing by, 59t, 88t, 101t, 149t; compliance vs default by, 88t, 98f, 101t, 183n65, 189n73; gunboat diplomacy and, 120t, 149t, 150t, 155; loan guarantees by, 87n3; military power of, 123n25, 150t; new vs seasoned borrowers and, 59t, 64; trade sanctions and, 166, 180n63; Venezuela and, 115–16, 134 iterated games See repeat play Jaggers, Keith, 123n26 Jamaica, 52 Japan: bond yields of, 59t, 68–69; borrowing by, 59t, 64–65, 68, 88t, 101t, 149t; compliance vs default by, 59t, 67, 88t, 98f, 101t, 101, 183n65, 189n73; gunboat diplomacy and, 120t, 148n87, 149t, 150t, 151; military power of, 123n25, 150t, 151; new vs seasoned borrowers and, 59t, 64, 67–69, 228; sakoku 287 INDEX (seclusion), 67–68; tax loopholes and, 207n32; trade sanctions and, 180n63, 191t; war and, 68f, 69, 101–02 Jaure´guiberry, Jean Bernard, 157 Jenks, Leland Hamilton, 47n17, 127n31 Jervis, Robert, 18n5, 237 Jessel, M R (Master of the Rolls), 158n1 Jones, Chester Lloyd, 155 Jones, Daniel M., 119n21, 122t Jones, Edward D., 74n3, 75t Jones, Michael A., 238n21 Jonker, Joost, 40 Jordan, David F., 74n3, 75t, 75n5 Jorgensen, Erika, 5, 86n1, 161n10, 163n22 J.P Morgan & Co., 75, 84, 93 J.S Morgan & Co., 65 Jua´rez, Benito, 131t Justo, Augustı´n (General), 175 Kahler, Miles, 200n17 Kaletsky, Anatole, 116n11, 117n16 Kanatas, George, 8n19 Kapstein, Ethan B., 200n17, 204n18 Kapur, Devesh, 200n17 Katz, Jonathan N., 123n27 Katzenstein, Peter J., 240n24 Kaufman, Robert R., 200n17 Kehoe, Patrick J., 238n21 Kelly, Trish, 47n17 Kemmerer, Edwin, 113 Keohane, Robert O., xiii, 5n3, 7n12, 240n24 Kim, Soo Yeon, 124n28 Kimber, Albert W., 74n3, 75t, 77, 80nn15,17–18, 87 Kimber’s Record of Government Debts, 88t, 95, 97f Kindleberger, Charles P., 47n17, 86n1 King, Gary, 62n47, 63n50 Kipling, Rudyard, 116n10 Kirkpatrick, F A., 154 Kirshman, John Emmett, 74n3, 75t, 76n8, 80n20, 89n5 Kletzer, Kenneth, 6n11, 11nn28,29, 160n5, 198n8, 200, 226n1 Klimenko, Mikhail M., 8n19 Kneer, Warren G., 133, 141n65, 142n71, 155 Knox, Philander C., 155 Kolesnik, Euge`ne M., 148n86 Kostelenos, George C., 179n61 Krantz, Olle, 179n61 Krasner, Stephen D., 114n2, 240n24 Kreps, David M., 227n3 Krueger, Anne, 236n16 Krupp, 140 Lagerquist, Walter Edwards, 74n3, 75t, 80nn16,18 Lains, Pedro, 156 Lake, David A., 153n91 Lamont, Thomas W., 93 Lane, Philip R., Langer, William L., 156 Langley, Lester D., 155–56 Lansdowne, Lord (Henry Charles Keith Petty-FitzMaurice), 137, 138nn52–54, 141n65 Larcom, Arthur, 137n47 Larkin, Charles, 116n8 Latane´, John H., 136 Latin America See specific country Latvia, 87n3, 88t, 89 Law Merchant system, 239–40 lawsuits, 158–59, 192 Leacy, F H., 179n61 League of Nations, 91n9, 92t, 179, 184t learning: complete-information theory and, 10; current calculus theory and, 30–32; desire-based theory and, 29–30; psychological biases and, 18, 29–30; reputation theory and, 10, 17–22, 25, 31, 86, 224– 27, 238, 241; risk, and, 15 Le Cacheux, Jacques, 60n43 Leche, J H., 106n39 Leeds, Brett Ashley, 241n28 Lee, Higginson & Co., 74 Leipzig, 42t, 43, 44t Leith-Ross, Frederick, 167n31, 170n40 Lemaitre, Eduardo, 154 lemons: beliefs about, 17, 224; Ecuador and, 87; expert opinion and, 79–83; Greece and, 54–55; incentives of, 26–27; learning about, 17–20, 82–83, 112–13, 230, 235; Mexico and, 87; not lending to (credit rationing), 24–26, 28, 53–54, 87–89, 112, 225, 228; other issue areas and, 238–41; political change and, 22, 225–26; Poyais fraud and, 50–53; preferences of, 17, 224; Russia and, 80, 86– 87; seasoning process and, 19–20, 27– 28, 39, 41–51, 55–69, 89–93, 225; settlements and, 19, 22, 28, 100, 112–13, 288 lemons (cont.) 238; trade sanctions and, 179 (see also trade sanctions); uncertainty premium and, 27, 39, 41–51, 55–69, 89–93, 225, 231–32 lenders: amount of lending by, 3, 200–1, 202t; Amsterdam market and, 40–47; atomized, 26, 209, 226, 233; bad times and, 94–113 (see also bad times); bailout guarantees from, 43n11, 54–55, 87n3, 100n21, 102n26, 228; bailout guarantees to, 204, 214; Baker Plan and, 207– 8; banks vs bondholders, 25–26, 36 (see also banks vs bondholders); beliefs of, 10–11, 14, 16–26, 224; bondholder committees and, 22n9, 81, 228, 234–35; cohesion of, 6, 9, 36, 196–219, 233; collective retaliation and, 6, 9, 36, 196–219, 233 (see also collective retaliation); commissions and fees, 24, 42, 45, 205, 214– 15, 217–18; conflicting priorities of, 25– 26; contextual inference and, 14, 17–20, 79–83, 224–25; controls for risk and, 24; credit rationing and, 24–25, 27–28, 39, 225; current calculus theory and, 30–32, 230; default and, 3–4, 14, 17– 22, 26–28, 225 (see also default); defensive loans and, 25–26; desire-based theory and, 29–30, 230; discrimination against, 152, 160–61, 164–68, 178, 182–90, 209–12, 232–33; expert opinion and, 70–85; forward-looking, 26; good times and, 86–93 (see also good times); gunboat diplomacy and, 7–9, 35, 114–57 (see also gunboat diplomacy); ignorance of history and, 5–6, 231–32; incentives of, 14, 23–26; incomplete information and, 10–11, 14–20, 31, 224 (see also incomplete information); International Lending Supervision Act and, 204–5; irrational exuberance and, 6, 226; issue linkage and, 4, 7–9, 32–33; learning and, 10–11, 17–22; loan maturities and, 24, 26, 95, 160, 214, 216–18; London market and, 47–69, 80–113, 161–90, 200–18; long-lived, 226–27; loss-leader loans and, 26; new vs seasoned borrowers and, 27, 39, 225, 231– 32; New York market and, 86–113, 200–18; petrodollar recycling and, 201, 204; Poyais fraud and, 50–53; puzzle of lending and, 3–9, 223; rating agencies INDEX and, 22n9, 27 (see also rating agencies); rationality and, 18, 21, 28–29, 31–32, 230; regulations and, 204–5, 214; repeat play and, 4–7, 10–11, 23, 224, 226; reputation theory and, 9–28, 223–27 (see also reputation evidence; reputation theory); risk premiums and, 24–25, 27, 212, 214–18, 225–26; seasoned borrowers (seasoning effects) and, 19–20, 27– 28, 39, 225; settlement payments (resumption of lending) and, 14, 19, 22–23, 25, 28, 29, 39, 225; short-lived, 226–27, 233; static preferences and, 11–12; surprising payers and, 14, 18–20, 28, 102– 12, 225; tax loopholes and, 205–9; termination of lending and, 14, 23; trade sanctions and, 8–9, 35–36, 158–95 (see also trade sanctions); trigger strategies and, 5, 10; types of debtors and, 15–17, 25, 224–25 (see also fair-weathers, lemons, and stalwarts); uncertainty premium and, 27, 39, 225, 231–32 See also specific country Lenin, Vladimir Il’ich, 161n7 Lessard, Donald R., 197n2, 198, 199n14 less-developed country (LDC) loans, See also specific country Lethbridge, E., 179n61 Lethbridge, Thomas, 144n78 Levandis, John Alexander, 55n33 Leviathan (Hobbes), xiii Lewis, Cleona, 71n1 Lewis, John P., 200n17 Lewis, Mervyn K., 114n2 Lex Mercatoria, 239–40 Liberia, 58, 59t, 67, 87, 88t, 149t, 191t Lincoln, Edmond E., 74n3, 75t, 79n12 Lindert, Peter H., 5, 47n17, 86n1, 151n89, 160n5, 200n17 Lingeman, Eric Ralph, 167n30 linkage theory See issue linkage Lipson, Charles, 5n3, 7, 115n6, 116n13, 133n35, 134n40, 198n7, 200n17 Lisman, F J., 197n3 Lissakers, Karin, 200n17, 205n23, 206, 207n30, 209, 214n48 List of References on Securities which are of General Interest to the S.E.C., 72 Lithuania, 88t, 89 loan-loss reserves, 205 loans See lenders Lohmann, Susanne, 7n12 INDEX London interbank offered rate (LIBOR), 214, 217 London market: bad times and, 94–113; banks vs bondholders and, 218; bond yields and, 48–53, 57–60; contextual inference and, 79–83, 86–113; Corporation of Foreign Bondholders (CFB) and, 81–82, 87, 138–39, 190–93, 234; credit rationing and, 34, 53–55, 86–89, 100–2, 112–13, 228; default and, 49–51, 53– 55, 58, 67, 86–87, 88t, 95–102, 209–12; early nineteenth century 43–57; economic conditions and, 60–63, 86–113 (see also economic conditions); expert opinion and, 34, 71–85; good times and, 86–93; gunboat diplomacy and, 116–57 (see also gunboat diplomacy); incomplete information and, 48, 50–51, 53, 60, 69; late nineteenth century, 57–69; Latin America and, 48–51; lending and, 47–69, 87–89, 100–2, 117–18, 134, 200–9; loan guarantees and, 54–55, 228; new vs seasoned borrowers and, 47–69, 89–93; Poyais fraud and, 50–53; reputation and, 43–69, 86–113 (see also reputation evidence); settlement and, 58–67; sovereign immunity doctrine and, 158– 59; sterling bonds, 91–92, 106–7, 160– 61, 164–67, 170, 178–82, 182–90; surprising payers and, 102–12; tax loopholes and, 205–9; trade sanctions and, 9, 161–94 (see also trade sanctions); twentieth century, 86–113, 161–90, 200–18 See also specific country Londos, M Anastasios, 154 loss-leader loans, 26 Luke, Lord of Pavenham (George Lawson Johnston), 170 Luxembourg, 101n23, 149t Lybrand, Ross & Co., 74 Lyon, Hastings, 74n3, 75t, 76n9, 82n27 Maandelijksche Nederlandsche Mercurius, 46f MacGregor, Gregor, 51–53 Mackintosh affair, 128t, 132, 154 Macleay, Ronald, 167n30 Macmillan, Rory, 234n10 Madden, John T., 74n3, 75t, 78n11, 80nn14,20, 81n23, 95n17, 111n57, 117n15 Maddison, Angus, 65n51, 117n17 289 Magazine of Bank Management, 209n40 Magazine of Wall Street, 112n58 Mailath, George J., 20n7, 21n8 Malaysia, 206n27 Mandeville, John Henry, 153–54 Manufacturers Hanover, 205–8 Maranhao, Brazil, 56n36 Marichal, Carlos, 6n10, 47n17, 86n1, 115n6 Marin, Dalia, 8n19 Marine Midland Bank, 208 market exclusion See credit rationing markets See Amsterdam market; euromarket; London market; New York market Marks, Frederick W., 115n5 Marshall, Monty G., 123n26 Martin, Lisa, 7n12, 226n1 Martin, Percy Alvin, 154 Martinez, Jose Vicente, Marzouk, Girgis A., 179n61 Mauro, Paolo, 7n16, 16n1, 47n17, 115n6, 117n16, 200n17, 234n10 Maxfield, Sylvia, 115n6 Maximilian (Emperor of Mexico), 131t McBeth, Brian S., 157 McCallum, W A., 162n15 McCreery, Fenton R., 155 McCusker, John J., 203f McGinnis, Michael D., 7n12 McLean, David, 153–54 McKeever, Isaac, 156 McKinnon, Ronald I., 204n21 Mecklenburg, 42t, 44t Medley, George Webbe, 67n54 Meetarbhan, Milan J N., 114n2 Megginson, William L., 215n52, 216n54 Mellon Bank, 208 Mendoza, Argentina, 171t Mercer, Jonathan, 29–30, 230, 240n25 Metternich, Paul von (Count), 141n65, 142n70 Metzler, Mark, 151n89 Mexico: bond yields of, 49t, 60t; borrowing by, 48, 49t, 54f, 60t, 88t, 88, 101t, 119, 149t; compliance vs default by, 54f, 60t, 87, 88t, 98f, 101t, 112–13, 178–79, 183n65; crisis of 1995 and, 211; financial missions to, 113; gunboat diplomacy and, 120t, 126f, 130t, 131t, 132–33, 144–46, 149t, 156; as lemon, 65, 87, 112–13, 228–29; new vs sea- 290 Mexico (cont.) soned borrowers and, 49t, 60t; trade sanctions and, 178–79, 191t Meynell, Everard, 170n40 Milgrom, Paul, 6n11, 227n3, 240n23 militarized interstate disputes (MIDs), 119, 121–33, 153–57 See also gunboat diplomacy military See gunboat diplomacy Miller, Gregory D., 241n28 Miller, Rory, 161n7 Miller, William, 157 Millington, Herbert, 154 Mills, Rodney H., 214n48 Milner, Helen V., 233n7 Minas Gerais, Brazil, 56n36 Mitchell, Brian R., 179n61 Mitchell, Nancy, 134n37 Mitchener, Kris James, 7n15, 9, 47n17, 115, 116nn11,13, 151n89 Mody, Ashoka, 200n17, 214n47, 236 Moloney, Alfred, 137n48 Monagas, Jose´ Tadeo, 131t Montgomery, Robert H., 74n3, 75t, 80n20 Moody, John, 74n3, 75t Moody’s Investors Service, 74, 90–91, 95– 96, 101, 109 Moody’s Manual of Investments, 88t, 90nn7,8, 191n10, 92t, 96n19, 97f, 101t, 101n22, 103t, 107t, 109n48, 110t, 171n43, 172n45 Morgan, Junius, 65–66 Morgan Guarantee Trust Co., 197, 208 Morning Chronicle, 51n22 Morocco, 120t, 149t, 191t Moro´n, Guillermo, 157 Morris, Ray, 74n3, 75t, 96n19 Morrow, Dwight, 75, 197n4 Morrow, James D., 241 Morton, Peter J., 5, 47n17, 86n1, 151n89, 200n17 Mosley, Layna, 7n16, 47n17, 115n6, 116n8 Mosquito Coast, 5152 Moynier, Adolphe, 118n19 Muăhlberg, Otto von, 142 Munro, Dana G., 155 Nacio´n, La, 174n49, 176 Nadler, Marcus, 74n3, 75t, 78n11, 80nn14,20, 81n23, 95n17, 111n57, 117n15 INDEX Naples, 49t, 55, 149t Napoleonic Wars, 40, 47–48, 190 Nassau, 149t National Association of Importers (Argentina), 176 National City Bank, 112n59 National Defense loan (France), 65 National Industrial Conference Board, 179n61 natural disasters, 10n25, 16 Nederlandsch Economisch-Historisch Archief, 40 Netherlands: bond yields of, 59t; borrowing by, 59t, 88t, 101, 101t; compliance vs default by, 59t, 88t, 98f, 101t, 189n73; gunboat diplomacy and, 117– 25, 131t, 132, 147–52, 157; lending by, 40–41, 47, 101n23, 117–19, 121, 147, 149t; military power of, 148, 150t, 151; new vs seasoned borrowers and, 59t; trade sanctions and, 191t, 194 Neves, Joa˜o Luı´s Ce´sar das, 179n61 New Consolidated Debt of 1881 (Venezuela), 134, 138 Newfoundland, 183n65, 189n73 New Granada, 135, 144, 146 New South Wales, 109 newspapers, 48, 52–57, 176, 190–93, 195, 232 New Statesman, 74 new vs seasoned borrowers: Amsterdam market and, 40–47; bond yields of, 41– 47, 50–52, 55–69, 90–92; classification of, 41–43, 48, 58, 89–90, 92; commissions and fees of, 42; control variables and, 43n10, 60–63, 90–91; database, 40–41, 43, 47–48, 58, 62, 89–91; eighteenth century, 40–47; euromarket and, 228n4; hypotheses about, 19–20, 27–28, 34, 39, 49, 51, 66–67, 90, 225; London market and, 47–69, 89–93; New York market and, 89–93; nineteenth century and, 47–69; Poyais and, 50–53; qualitative evidence and, 46n15, 50–51, 55–57, 67–69, 92–93; regression analysis and, 62–64, 66–67, 90–92; reputation theory and, 19–20, 27–28, 34, 39, 49, 51, 66– 67, 90, 225, 231–32; sample dates and, 48–50, 57–58, 90; synopsis of evidence, 33–34, 69, 112, 227–28; twentieth century and, 89–93, 228n4 See also specific country INDEX New Yorker, 116 New York Herald Tribune, 108 New York market: bad times and, 94–113; contextual inference and, 79–83, 86– 113; credit rationing, 86–89, 100–2, 112–13, 228; default and, 86–87, 88t, 95–102, 209–12; dollar bonds, 91, 95– 96, 164–68, 179–85, 197; economic conditions and, 86–113; expert opinion and, 34, 71–85; Foreign Bondholders Protective Council (FBPC), 82, 187, 188n68, 234; good times and, 86–89; gunboat diplomacy and, 8–9, 117–25, 128t, 132, 147–52, 154–56 (see also gunboat diplomacy); implicit guarantees and, 204–5; interwar period, 86–113; lending and, 71, 87–89, 94, 108, 117–19, 160, 200– 9; new vs seasoned borrowers and, 89– 93; regulations and, 204–5; reputation and, 86–113 (see also reputation evidence); sovereign immunity doctrine, 159; surprising payers and, 102–12; tax loopholes and, 205–9; trade sanctions and, 178–90; twentieth century, 86–113, 200–18 New York Times, 154–57, 174n50 New York Tribune, 65 New York University, 74, 79, 93 New Zealand, 88t, 98f, 101t, 103, 103t, 163, 180n63 Nicaragua: borrowing by, 50, 54f, 88t, 89, 101t, 149t; compliance vs default by, 54f, 88t, 98f, 101t; gunboat diplomacy and, 120t, 149t; Poyaisian fraud and, 51; trade sanctions and, 180n63, 191t Nichols, Irby Coghill, 156 Niemeyer, Otto, 104–7, 170n40 Nilsson, Carl-Axel, 179n61 nineteenth century, 47–69, 114–53, 158, 190–94, 234n10, 235n11 Nisbett, Richard, 18n5 nonstate actors, 3, 223 See also lenders Norddeutsche Bank, 140 North, Douglass C., 233n7, 240n23 Norway: bond yields of, 103t; borrowing by, 88t, 101t, 101n23, 149t; compliance vs default by, 88t, 98f, 101t, 183n65, 189n73; gunboat diplomacy and, 120t, 149t; trade sanctions and, 180n63, 191t Nunnenkamp, Peter, 160n5 Nye, Joseph S., 7n12 291 Obstfeld, Maurice, 16n1, 47n17, 86n1, 114n2, 200n17 O’Connell, Arturo A., 104n30, 162n16, 166nn25,27, 170n41 O’Conor, Nicholas Robert, 155 odds ratio, 124n29 Officer, Lawrence H., 203f O’Leary, Daniel F., 145n79 Olson, Mancur, 196n1 O’Rourke, Kevin H., 47n17 Ortiz Monasterio, Jose Mara, 145n79 ă sterreichisches Institut fuăr WirtschaftsO forschung, 179n61 Otto, Prince of Bavaria, 5455 Otto, Walter, 140n62, 141n64 Ottoman Empire See Turkey Oudermeulen, Cornelis van der, 43n11, 44t, 44n12, 46f Ouseley, William Gore, 154 out-groups, 29 Oye, Kenneth, 5n3, 7n12, 86n1, 160, 161n10 ă zler, S¸ule, 5–6, 8n19, 160n5, 228n4 O Packenham, Robert A., 161n9 Pakenham, Richard, 145n79 Pakenham, Thomas, 157 Paine, Webber & Co., 74 Pakistan, 206n27 Pallmann, Heinrich, 118n19 Palmer, Glenn, 119n20 Palmerston, Lord (Henry John Temple), 55, 144, 146, 154 Panama, 88t, 99f, 101t, 180n63, 191t Pando, Jose´ Marı´a de, 146n82 Papal States (Holy See), 120t, 149t Para´, Brazil, 56n36 Paraguay: bond yields of, 59t; borrowing by, 58, 59t, 88t, 101t; compliance vs default by, 59t, 67, 87, 88t, 99f, 101t; gunboat diplomacy and, 120t; new vs seasoned borrowers and, 58, 59t; trade sanctions and, 180n63, 191t; war with Brazil, 56 Parliamentary Debates, 139nn57–59, 140nn60,61, 141n65, 144n76, 156 Patos Island, 137 Patterson, Ernest Minor, 74n3, 75t, 81n24, 83n30 Pauly, Louis W., 235n15 payment See default vs repayment Peacock, Edward Robert, 170n40 292 Pecchioli, R M., 216n53 pegging currencies, 165, 239 Pereira, Jose´ Francisco, 146n81 Persia See Iran Peru: bonds versus bank loans, 216–18; bond yields of, 49t, 52f, 59t; borrowing by, 48, 49t, 54f, 59t, 88t, 101t, 149t, 216–18; compliance vs default by, 54f, 59t, 88t, 99f, 101t, 158, 184t, 189, 192; financial missions to, 113; gunboat diplomacy and, 120t, 127, 128t, 144, 145t, 146, 149t; new vs seasoned borrowers and, 49t, 59t; Poyais and, 51–53; sovereign immunity and, 158; trade sanctions and, 180n63, 184t, 185, 189, 191t, 192 Peterson, Harold F., 166n25 Petty, John, 208n36 Peyrot, Edouard, 118n19 Phelan, Christopher, 20n7 Philip, George, 137nn47,48,50, 138nn52,53, 139n56, 151n89 Philippines, 206 Philpott, Daniel, 115n3 Picht, Hartmut R., 160n5 Piemont, 149t Pinedo, Federico, 176 plantation communities, 41n7 Platt, Desmond Christopher Martin, 115n6, 116n13, 133n35, 134n40 Poland: bond yields of, 44t; borrowing by, 43–45, 88t, 101t, 149t; compliance vs default by, 44t, 88t, 99f, 101t, 184t; financial missions to, 113; gunboat diplomacy and, 149t; new vs seasoned borrowers and, 44t, 45, 89, 93; trade sanctions and, 180n63, 184t political change, 11–12, 20–24, 224, 227 See also reputation theory politics See collective retaliation; governments; gunboat diplomacy; issue linkage; repeat play; reputation theory; trade sanctions See also specific country Pombo, Lino de, 145n79, 154 Portales, Diego, 145n79 Porter, Robert Ker, 146n83 Portes, Richard: bondholder organization and, 234n10, 236n18; Great Depression and, 5, 86n1, 94, 109; lender of last resort and, 235n12; trade sanctions and, 161n10, 180n64 Portugal: bond yields of, 49t, 59t; borrowing by, 48–49, 49t, 54f, 59t, INDEX 88t, 101t, 149t; Brazil and, 56; compliance vs default by, 49t, 54f, 59t, 88t, 99f, 101t, 126f; economic conditions in, 64; gunboat diplomacy and, 120t, 126f, 127, 130t, 132, 144, 145t, 149t, 156; new vs seasoned borrowers and, 49t, 59t, 93; trade sanctions and, 180n63, 191t pre–World War I era, 5–9, 22, 34–35, 40– 69, 71, 89, 114–53, 158, 190–95, 203f, 223, 227–29, 232, 234n10, 235n11 post–World War II era, 3–9, 12, 36, 83– 84, 112n59, 159–60, 197–219, 228n4, 233–36 Pottier, Edouard, 155 Poyais, 50–53, 54f Poyer Indians, 51 Prensa, La, 176 Press, Daryl G., 31–32, 230, 240n25 price courant, 43–44 probit regression, 180–82, 210–12, 213f promises See commitments protectionism See trade Prussia, 41n7, 47, 49t, 55, 65 punishment See collective retaliation; embargoes; gunboat diplomacy; issue linkage; trade sanctions; trigger strategies Queen (ship), 137–38 railroads, 24n11, 90–91, 140–41 Rankin, Keith, 179n61 rating firms, 22n9, 27, 33–34, 72, 74, 77– 80, 85, 87, 96, 229 rationality: current calculus theory and, 30–32; desire-based theory and, 29–30; irrational exuberance and, 6; promisekeeping and, xiii; reputation theory and, 18, 21–22, 28, 39, 53, 230 Raymond, William L., 74n3, 75t Redmond & Co., 91n10, 92t, 108n46 regression analysis: Argentine beef exports and, 171–74; bond yields and, 60–67, 90–92; compliance levels and, 171–74, 178–82; conditional logit and, 124; debt-to-export ratio and, 60–63; debtto-wealth ratio, 91; default vs repayment and, 123–24; dollar vs sterling debt and, 91–92; exports per capita and, 61–63; foreign financial control and, 91– 92; fractional probit regression and, 180–82; GDP per capita and, 179–82; INDEX gunboat diplomacy and, 123–24; illiteracy rate and, 172–74; imputation of missing values and, 62–63, 90–91, 179; lemons and, 62–63; logistic regression, 123–24; militarized insterstate disputes (MIDs) and, 123–24; new vs seasoned borrowers and, 60–76, 90–92; settlement and, 62–64, 66, 90–92; Tobit regression, 172n46; trade sanctions and, 178–80; trade with the lender and, 178– 81; wealth and, 61–62, 90–91, 172 regulators: banks and, 204–5; bonds and, 79, 85 Reinisch, August, 114n2 religion, 18, 127, 129t, 130t, 131t, 132, 155 repayment See default vs repayment repeated games See repeat play repeat play: collective retaliation and, 6, 26, 88–89, 100, 196, 215–16, 226; complete information and, 10–11; cooperation and, xiii, 4–7, 224; evidence about, 5–6; incomplete information and (see reputation theory); intrinsic sanctions and, 7; shadow of the future and, 5; static preferences and, 11–12, 20–21; syndicates and, 215–16; trigger strategies and, 4–6, 10, 26, 88–89, 100, 196, 215–16, 226 Report of the Commissioners of Her (His) Majesty’s Inland Revenue (United Kingdom), 118n18 reputation evidence: atomized lenders and, 36, 196–219, 233; bad times and, 34– 35, 94–113 (see also bad times); banks vs bondholders and, 25–26, 233 (see also collective retaliation); bond advertisements and, 78; bondholder committees and, 81–82, 87, 187, 228, 234–35; borrower behavior and, 161, 164, 175– 78, 195, 229 (see also default vs repayment); contemporary bankers and, 83– 84; contextual inference and, 34, 79–83, 86–113, 228–29 (see also contextual inference); credit rationing (market exclusion) and, 34, 53–55, 86–89, 100–2, 112–13, 228; default in equilibrium and, 228–29 (see also default vs repayment); diplomatic correspondence and, 146–47, 153, 229; economic conditions and, 34– 35, 86–113 (see also economic conditions); expert opinion and, 34, 70–85, 293 193, 229 (see also expert opinion); good times and, 34, 86–93 (see also good times); new borrowers, 33–34, 39–69, 228 (see also new vs seasoned borrowers); Poyais fraud and, 50–53; rating firms and, 34, 72, 74, 77–80, 85, 229; regulators and, 79; seasoned borrowers, 33–34, 39–69, 228 (see also new vs seasoned borrowers); settlement payments (market reentry) and, 34, 47, 58–64, 66, 69, 83, 90–92, 100, 113, 228; shortlived creditors and, 226–27, 233; statements of key decisionmakers, 175–78; surprising payers and, 34–35, 102–13, 229; synopsis of, 33–35, 57, 69, 84–85, 112–13, 227–32; uncertainty premium and, 33–34, 39–69, 228 (see also new vs seasoned borrowers); unexplained variation, 46, 89 See also reputation theory; specific country reputation theory, 9–28, 224–27; alternatives theories to (see collective retaliation; current calculus theory; desirebased theory; gunboat diplomacy; issue linkage; trade sanctions); atomized lenders and, 26, 209, 226, 233; banks vs bondholders and, 25–26, 233 (see also collective retaliation); beliefs about types and, 10, 14, 16–26, 224–27; bondholder committees and, 22n9, 81, 228, 234–35; changing of reputations and, 18–20; contextual inference and, 14, 17–20, 28, 34, 70, 79, 85–86, 224–25; cooperation under anarchy and, 23–28, 33, 223–41; credit rationing (market exclusion) and, 24–25, 27–28, 34, 39, 53, 86, 100, 225; default in equilibrium, 225–26; default vs repayment and, 14, 17–22, 26–28, 225; domestic politics and, 12, 14–17, 27; economic conditions and, 14–20, 28, 30, 225, 231; exceptions to, 29; expert opinion and, 28, 34, 70; extensions of, 236–41; forward-looking lenders and, 26; Hobbes and, xiii; incentives of governments and, 14, 26–27, 224–27; incentives of lenders and, 14, 23–26, 224–25; incomplete information and, 10–11, 14– 20, 31, 224; learning and, 10, 17–22, 25, 31, 86, 224–27, 238, 241; new borrowers (uncertainty premiums) and, 19– 20, 27–28, 34, 39, 49, 51, 66–67, 90, 225, 231–32; policy implications and, 294 reputation theory (cont.) 233–36; political change and, 11–12, 14, 20–23, 224, 227; predictions of, 27–28, 33–35, 39, 49, 51, 53, 66–67, 70–71, 79, 85, 86, 90, 100, 102–4, 224–27; rating agencies and, 22n9, 27; rationality and, 18, 21, 28–29, 31–32, 230; repeat play and, 9–11, 224, 226–27; risk premiums and, 24–25, 27, 225–26; seasoned borrowers (seasoning effects) and, 19– 20, 27–28, 34, 39, 49, 51, 66–67, 90, 225; settlement payments (market reentry) and, 19, 22–23, 25, 28–29, 34, 39, 53, 66, 100, 225; short-lived creditors and, 226–27, 233; spillovers across issues and, 69, 238–39; static-preferences paradox and, 21–22; surprising behavior and, 14, 18–20, 28, 34, 102–4, 225; synopsis of, 224–27; trigger strategies vs., 10–11, 26, 84, 88–89, 100; types of debtors and, 15–17, 25, 224–25 (see also fair-weathers; lemons; stalwarts) See also reputation evidence reserve ratio, 204–5 retaliation See collective retaliation; embargoes; gunboat diplomacy; trade sanctions; trigger strategies retribution See collective retaliation; embargoes; gunboat diplomacy; issue linkage; trade sanctions; trigger strategies Review of the River Plate, 105nn32–34,36, 162n15, 169n37, 174n50, 175n53, 176nn55,56 Revolt of the Confederation of the Equator (Brazil), 56 Richards, Anthony, 236n17 Richthofen, Oswald von, 141–42 Rieffel, Lex, 114n2 Riley, James C., 40, 43n10, 46n15, 198n10 Rı´o, Manuel del, 146n82 Rio Grande Sul, Brazil, 56n36 Rı´o Tinto, 51 Rippy, J Fred, 47n17 risk: avoidance of, 24–25; charging for, 24, 41; controlling of, 24; credit rationing and, 24–25; default and, 23–26; learning about, 10, 17–22, 25, 31, 86, 224–27, 238, 241 (see also reputation theory); premiums for (see interest rates; new vs seasoned borrowers) risk ratio, 124n29 Roberts, John, 227n3 INDEX Robinson, Ronald, 133n35, 161n7 Rock, David, 162n18, 166n25, 169n35 Rockoff, Hugh, 47n17, 69n56, 239n22 Rodrı´guez, Carlos, 146n83 Rodrik, Dani, 116n11 Rogoff, Kenneth, 6n11, 8n19, 16n1, 117n16, 215, 234 Rollins, Montgomery, 74n3, 75t Romania: bond yields of, 59t; borrowing by, 59t, 88t, 101t, 149t; compliance vs default by, 67, 88t, 99f, 101t, 184t; gunboat diplomacy and, 120t, 149t, 150t; military power and, 150t; new vs seasoned borrowers and, 59t, 89, 93; trade sanctions and, 180n63, 184t, 185–86, 189–90, 191t, 195 Ronald, James H., 82n26 Roosevelt, Theodore, Roosevelt Corollary, 151n89 Rosas, Juan Manuel (General), 127 Rose, Andrew K., 8–9 Ross, Lee, 18n5 Rothschild, N M., 47 Roubini, Nouriel, 117n16 “Rowers, The” (Kipling), 116n10 Royal Institute of International Affairs, 81n22, 96–97, 100n20, 1012, 109n50, 110t Rua, Fernando de la, 12 Ruăhl, Christof, 197n3 Rural Society (Argentina), 162–63, 166, 174 Russell, Joseph, 128t, 132 Russell, Lord John, 156 Russia: bond yields of, 42t, 44t, 49t, 59t; borrowing by, 42t, 44t, 49t, 59t, 88t, 88, 101t, 149t; compliance vs default by, 22, 42t, 44t, 47, 49t, 59t, 80, 87, 88t, 99f, 101t, 178–79, 183n65; economic conditions in, 61; gunboat diplomacy and, 120t, 129t, 149t, 150t, 151, 155; as lemon, 80, 86–87, 228–29; loan guarantees by, 43n11, 54–55, 228; military power of, 123n25, 150t, 151; new vs seasoned borrowers and, 42t, 43, 44t, 45, 49t, 55, 57, 59t, 64, 67; political change and, 22, 80, 87, 229; trade sanctions and, 178–79, 191t Sachs, Jeffrey D.: banks vs bondholders and, 200n17; Great Depression and, 5, 86n1; gunboat diplomacy and, 115n6; INDEX lender of last resort, 235n13; trade sanctions and, 160, 161n10, 163n22 Saiegh, Sebastian M., 233n7 Sakolski, Aaron M., 74n3, 75t, 117n15 Salisbury, Marquis of (Robert GascoyneCecil), 151n89, 155–56, 192n75 Samuelson, Larry, 20n7, 21n8 Sa´nchez, Efraı´n, 154 Sa´nchez Sorondo, Matı´as, 174, 176 sanctions See collective retaliation; embargoes; gunboat diplomacy; issue linkage; trade sanctions; trigger strategies Sandleris, Guido, 9, 233n7 sanitary embargo (beef), 166 Santa Catarina, Brazil, 56n36 Santa Fe, Argentina, 171t, 174 Santo Domingo See Dominican Republic Sa˜o Paulo, Brazil, 56n36 Sardinia See Sicilies (Two) Sartori, Anne E., 240n26 Saugy, Ernest de, 118n19 Sauvain, Harry C., 111n57 Saxony, 42t, 44t, 44n12, 120t, 149t Schnitzer, Monika, 8n19 Schoepperle, Victor, 112n59 Schoălch, Alexander, 133n35 Schoonover, Thomas, 15556 Schularick, Mortiz, 47n17, 153n91 Schultz, Kenneth A., 6n11, 212, 226, 233n7 Schwartz, Anna J., 239n22 Schweiger, Emilio, 169n37 seasoned borrowers See new vs seasoned borrowers seasoning hypothesis See new vs seasoned borrowers Securities and Exchange Commission (U.S.), 71n2, 72–73, 79n13, 82n28, 188 Selborne, Lord (William Palmer), 140 Senterfitt, Donald T., 208n35 Sentinel (Glasgow), 52n27 Serbia See Yugoslavia Setser, Brad, 117n16 settlement payments: bond yields and, 58– 60, 62–64, 66, 90–92; control variables and, 60–63; expert opinion and, 83; Great Depression and, 100, 113; hypotheses about, 19, 22–23, 25, 28–29, 34, 39, 53, 66, 100, 225; regression analysis and, 62–64, 66; reputation theory and, 19, 22–23, 25, 28–29, 34, 39, 53, 66, 295 100, 225; Russia and, 47; synopsis of evidence, 34, 69, 228 shadow of the future, 5, 224 Shee, George, 143n75 Shipley, Walter V., 208n36 Siam (Thailand), 88t, 99f, 101t, 103t, 120t, 180n63 Sicilies, Two, 121t, 149t Siepmann, Harry Arthur, 167n30, 170n40 Simancas, Archivo General de (General Archive of Simancas), 41 Simmons, Beth A., 86n1, 239n22 Simon, John Allsebrook, 167n30 Sinclair, David, 51n23 Singer, J David, 119n21, 122t, 150t Sketch of the Mosquito Shore, including the Territory of Poyais (Strangeways), 51–52 Skiles, Marilyn E., 161n10, 163n22 Smalley, George W., 66 Smith, Alastair, 240n26 Smith, Guillermo, 146n83 Smith, Peter H., 162nn13,17, 163n20, 172n44, 174n49 Smith, Roy C., 216 Smoot-Hawley Act, 165–66 Snidal, Duncan, 5n3, 7n12 Snowden, Nicholas, 199n14 Snyder, Glenn H., 240n25 Sobel, Andrew C., 200n17 Some Sources of Information on Stocks and Bonds (Standard Statistics Company), 72 Soros, George, 114n2 Sources of Investment Information (Special Libraries Association), 71–72 South Africa: bond yields of, 103, 103t; borrowing by, 88t, 101t, 149t; compliance vs default by, 88t, 99f, 101t; financial missions to, 113; gunboat diplomacy and, 149t; trade sanctions and, 180n63, 191t South American Journal, 107n42, 132–33 Soveral, Luis de, 156 sovereign governments See governments See also specific country sovereign immunity, 158–59, 192 Spain: bond yields of, 42t, 44t, 46f, 59t; borrowing by, 42t, 44t, 54f, 59t, 88t, 89, 101t, 149t; compliance vs default by, 42t, 44t, 50, 54f, 59t, 88t, 99f, 101t, 126f; economic conditions in, 64; 296 Spain (cont.) gunboat diplomacy and, 120t, 126f, 130t, 132, 144, 145t, 149t, 150t, 156; lending by, 164; military power of, 150t; new vs seasoned borrowers and, 42t, 43, 44t, 45, 46f, 59t; trade sanctions and, 191t; wars of independence from, 51, 89 Spangenthal, S., 118n19 Special Libraries Association, 71n2, 72 Spiegel, Mark M., 8n19, 9nn21,22, 198n6 Stallings, Barbara, 200n17 stalwarts: beliefs about, 17, 224; incentives of, 26–27; learning about, 17–20, 34, 112, 226, 230, 235; lending to, 25; other issue areas and, 238–41; political change and, 21–22, 102; preferences of, 17, 224; surprising payers as, 102–11, 229 Stam, Allan C., 123nn23,24 Standard & Poor’s, 4n2, 72, 209n43, 210t Standard Statistics Company, 72 Stanley, Edward John, 144n78 Stanley, Lord (Edward Henry Stanley), 135 Stasavage, David, 233n7 Stavrianos, Leften Stavros, 155 Stein, Arthur A., 7n12 Steinmetz, Will, 118n19 sterling bonds: Argentina and, 106–7, 164–67, 170; compliance and, 178–82; discrimination and, 160–61, 182–90; Venezuela and, 134; yields and, 91–92 Stewart, Taimoon, 115n3 Stiglitz, Joseph E., 6n11 St John, Alfred, 154 Stock Exchange Gazette, 133n34 Stone, Irving, 47n17 Stone, Randall W., 200n17, 235n15 Strangeways, Thomas, 51–52 Stuckey, John, 150t StudieCentrum voor Onderneming en Beurs (Belgium), 118n19 Sturzenegger, Federico, 159, 200n17 Sullivan, William M., 157 Summers, Lawrence, 198 Sundaram, Anant K., 215n51 Sundaresan, Suresh, 8n19 Surinam, 41n7 surprising payers, 102–12; Argentina as, 104–8; austerity and, 105–6, 109; Australia as, 108–11; classification of, 102– 4; debt conversions of, 106, 107t; economic conditions of, 104–5, 109; Fin- INDEX land as, 111–12; hypotheses about, 14, 18–20, 28, 34, 102–4, 225; qualitative evidence and, 106–8, 110–13; reputation theory and, 14, 18–20, 28, 34, 102–4, 225; synopsis of evidence, 34–35, 112– 13, 229 Sussman, Nathan, 7n16, 47n17, 68f, 69n56, 115n6, 117n16, 200n17, 234n10 Suter, Christian, 4n2, 47n17, 54f, 86n1 Sweden: bond yields of, 42t, 44t, 59t, 64; borrowing by, 42t, 44t, 59t, 88t, 100– 101, 101t, 149t; compliance vs default by, 42t, 44t, 59t, 88t, 99f, 101t, 183n65, 189n73; gunboat diplomacy and, 121t, 149t, 150t; lending by, 101n23; military power of, 150t; new vs seasoned borrowers and, 41n7, 42t, 43, 44t, 45, 59t, 64; trade sanctions and, 180n63, 191t Swedish Match Trust, 87n3 Swiss Bank Corporation, 118n19 Switzerland: borrowing by, 88t, 100–101, 101t, 149t; compliance vs default by, 88t, 99f, 101t, 189n73; economic conditions in, 90; gunboat diplomacy and, 117–25, 147–52; lending by, 101n23, 117–19, 147n85, 149t; military power of, 148, 150t, 151; trade sanctions and, 180n63, 191t, 194 Sylla, Richard E., 193n80 syndication of loans, 198, 200, 212–18 Tabellini, Guido, 160n5 tariffs: Fordney-McCumber Act and, 165; foreign control of customshouses, 24, 91, 102, 130t, 153n91; Great Depression and, 94–95; Smoot-Hawley Act and, 165–66; Tariff Act of 1930 and, 166n26; trade agreements and, 239; trade sanctions and, 158, 160, 187– 88, 192; U.S Tariff Commission and, 187–88 taxes: loopholes and, 205–9, 214; reform and, 208–9; to repay debts, 15–16, 106, 111, 129t, 132, 164, 168–70 Taylor, Alan M., 47n17, 86n1, 161n10, 200n17 Taylor, A Wellington, 74n3, 75t, 89n6, 93n13 Taylor, Bryan, 56f Taylor, John, 236n18 Taylor, Michael, 5n3 INDEX Terrell, Henry S., 214n48 Testing before Investing (Lincoln), 78 Tests of a Foreign Government Bond (Patterson), 81 Tetlock, Philip E., 18n5 Thacker, Strom C., 235n15 Thailand See Siam Times (London), 107–8, 170n38, 192–93; gunboat diplomacy and, 116n10, 133n34, 135n42, 137n48, 138n54, 140nn61,63, 141nn64–66, 143nn72,73, 154–57; new vs seasoned borrowers and, 48, 50, 51n22; 52n26, 53, 55n34, 56–57 Tirole, Jean, 236n16 Tissot, Charles Joseph, 157 Tobit regression, 172n46 Tollison, Robert D., 7n12 Tomz, Michael, 12nn31,33, 63n50 Torre, Lisandro de la, 174, 176 Toutain, Jean-Claude, 179n61 trade: Agricultural Adjustment Act of 1933 and, 166; beef and, 161–77; cooperation and, 239–40; discrimination issues and, 182–90; exchange control policy and, 168–70; Fordney-McCumber Act and, 165; Great Depression and, 4–6, 34–35, 82, 90, 94–95; incomplete information and, 15; sanctions and, 8–9, 35–36, 158–95 (see also trade sanctions); sanitary embargo, 166; Smoot-Hawley Act and, 165–66; syndication and, 215–16 trade sanctions: asset seizure and, 158–59; beef exports and, 161–66, 169–77; collective retaliation and, 9, 196, 215–16; commercial credit and, 158–59; compliance levels and, 178–82; credibility and, 9, 196; credit rationing (selection bias) and, 182; cross-country analysis of, 178–90; databases about, 178–80, 182– 83; dependence on United Kingdom markets, 161–68, 177; diplomatic correspondence and, 190; discrimination patterns and, 160–61, 164–68, 182–90; dollar bonds and, 164–68, 178–90; exchange control policy and, 168–70; expert opinion and, 71–78, 182, 193; financial press and, 190–93; fractional probit regression and, 180–82; hypotheses about, 8–9, 33, 70, 158–66, 170, 175–76, 178, 182, 186, 190, 194; interwar period and, 160–90; invulnerable borrowers and, 9, 297 193; sanitary embargo and, 166; small role of, 194; sovereign immunity and, 158–59; statements of decisionmakers and, 175–77; sterling bonds and, 160– 61, 178–90; syndication and, 215–16; synopsis of evidence, 8–9, 35–36, 177– 78, 195, 232–33; three types of, 158–61 See also specific country Transvaal, 127, 130t, 132, 149t trigger strategies: cooperation and, 4–5, 10, 26, 226–27, 232; gunboat diplomacy and, 117, 119, 127, 133, 137, 141, 147; reputation theory vs., 10–11, 26, 84, 88–89, 100; trade sanctions and, 170 Trinidad and Tobago, Colony of, 137 Tucker, Richard, 123n27 Tucuma´n, Argentina, 171t Tunisia, 121t, 131t, 132, 149t, 191t Turkey: bond yields of, 59t; borrowing by, 59t, 88t, 101t, 149t; compliance vs default by, 59t, 87, 88t, 99f, 101t, 126f; economic conditions in, 61, 65; financial missions to, 113; Greek independence from, 54, 228; gunboat diplomacy and, 121t, 126f, 129t, 130t, 131t, 132, 133n35, 136n44, 149t, 150t, 155–57; military power of, 150t; new vs seasoned borrowers and, 59t, 65; trade sanctions and, 180n63, 190, 191t Turkey State Institute of Statistics, 179n61 Turlington, Edgar, 156 Turner, William, 145n79, 146n81, 154 Tuscany, 121t twentieth century, 71–84, 85–113, 159–90, 193–94, 196–219, 228n4; 233–36 Twycross v Dreyfus, 158n1 uncertainty premium See new vs seasoned borrowers underwriters, 41–42, 47, 65, 78, 101n23, 198–99, 235n11 Unger, Friedrich E., 118n19 United Kingdom: Argentina and, 126–27, 128t, 161–78; attitude toward obligations and, 88; borrowing by, 41n7, 149t; British Board of Trade and, 167, 170; compliance vs default by, 189n73; Corporation of Foreign Bondholders (CFB) and, 81–82, 87, 138–39, 190–93, 234; diplomatic correspondence and, 143–47; discrimination and, 182–90; Guatemala and, 132–33; gunboat diplomacy and, 298 United Kingdom (cont.) 116–57; Inland Revenue and, 118n18, 208n39; Institute of Export and, 84; interest rates and, 203f; investment literature analysis of, 34, 71–84; lending by, 47–69, 87–89, 94, 100–2, 117–18, 134; loan guarantees by, 54–55, 228; military power of, 123n25, 150t, 151–52; nineteenth-century London market and, 47– 69; sovereign immunity doctrine and, 158–59; sterling bonds and, 91, 94–95, 106–7, 160–61, 164–67, 170, 178–90; tax loopholes and, 205–9; trade sanctions and, 9, 161–94; U.S state debts and, 9, 193–94; Venezuelan crisis of 1902 and, 115–17, 131t, 132–40, 143 United Kingdom Board of Trade, 167, 170 United Kingdom Department of Overseas Trade, 162n14 United Kingdom National Archives, 137n49, 138n53, 153–55 United Kingdom War Office Intelligence Division, 148n86 United Nations, 117n17, 179n61, 216–18 United Provinces of Central America, 50, 60t, 145t, 147 United States: Agricultural Adjustment Act of 1933 and, 166; Argentina and, 164– 68; attitude toward obligations and, 88; Baker Plan and, 207–8; bank guarantees and, 204–5; bank regulations and, 204– 5; bond yields of, 44t; borrowing by, 43–45, 149t; Brazil and, 186–87; Colombia and, 187–88; Department of State, 155–56; Department of the Treasury, 197n4 (see also U.S Department of the Treasury); discrimination against, 182– 90; dollar bonds and, 91, 95–96, 164– 68, 179–85, 197; Fordney-McCumber Act and, 165; Foreign Bondholders’ Protective Council (FBPC) and, 82, 234; gold standard and, 165; Great Depression and, 94, 101; gunboat diplomacy and, 8–9, 117–25, 128t, 132, 147–52, 154–56; Haiti and, 102; interest rates in, 201, 203f; Internal Revenue Service and, 206–9; International Lending Supervision Act and, 204–5; investment literature analysis of, 34, 71–84; lending by, 71, 87–89, 94, 108, 117–19, 160; military power of, 123n25, 150t; new vs seasoned borrowers and, 44t, 45; recip- INDEX rocal trade agreements and, 187–88; sanitary embargo by, 166; Securities and Exchange Commission and, 72, 79n13; Smoot-Hawley Act and, 165–66; sovereign immunity doctrine and, 159; tax loopholes and, 205–9; trade protectionism and, 94, 165–66; trade sanctions and, 77, 160–61, 164–68, 178–90, 193– 94; U.S state debts and, 9, 193–94; war debts to, 111–12; wealth of, 90 updating See learning Uppal, Raman, 198n7, 216n55 Uruguay: bond yields of, 59t; borrowing by, 59t, 88t, 101t, 149t; compliance vs default by, 59t, 67, 88t, 99f, 101t, 184t; gunboat diplomacy and, 121t, 127, 128t, 144, 145t, 149t; new vs seasoned borrowers and, 59t; trade sanctions and, 180n63, 184t, 191t U.S Congress, 72, 111, 165, 204–8 U.S Congress, Joint Committee on Taxation, 206n29 U.S Department of Commerce, 74, 184t, 202f U.S Department of State, 82, 155–56 U.S Department of the Treasury, 111, 112n59, 197–98, 207–8 U.S Federal Reserve, 204 U.S Tariff Commission, 187–88 U.S Treasury bills, 214 Utrecht University, 40 Valenzuela, Arturo, 161n9 Valenzuela, J Samuel, 161n9 Vandenbosch, Amry, 157 Vanderauwera, Ch., 118n19 Van Hulle, Cynthia, 198n7, 216n55 Van Huyck, John B., 16n1 Va´zquez-Presedo, Vicente, 165n24, 172n45 Ve´lez, Alejandro, 146n81 Venezuela: bond yields of, 49t, 60t, 134; borrowing by, 49t, 54f, 60t, 88t, 89, 134–35, 140–41, 149t; compliance vs default by, 54f, 60t, 88t, 99f, 126f, 133–35, 140–41; gunboat diplomacy and, 115–16, 121t, 126f, 131t, 132, 135–47, 148n87, 149t, 157; new vs seasoned borrowers and, 49t, 60t; trade sanctions and, 191t See also Venezuelan crisis of 1902 299 INDEX Venezuelan crisis of 1902: 115–16, 132– 43; blockade and, 134; Castro and, 133– 34; civil war and, 136–43; Diplomatic Debt of 1905 and, 134; Germany and, 140–43; immediate aftermath and, 135, 138–39, 142; intervention timing and, 134–37, 140–41; Italy and, 134; official rationale and, 135, 139–40, 142–43; private communication content and, 135, 138, 141–42; railroad project and, 140– 42; Queen incident and, 137–38; ultimatums and, 135, 138–39, 142; United Kingdom and, 135–40; Washington Protocol and, 134, 139–40 Verdier, Daniel, 200n17 Vernassa, Maurizio, 134n38 Vikøren, Birger, 239n22 Villegas Revueltas, Silvestre, 156 Villiers, Francis H., 137, 138n53, 139 Virginius dispute, 130t, 132, 156 Vreeland, James Raymond, 235n15 Wallis, John Joseph, 193n80 Wall Street Journal, 8, 208n39, 209n40 Walpole, John, 145n79 Walter, Barbara F., 240n26 Walter, Ingo, 216 War of the Pacific, 127, 128t Warrington, Lewis, 156 Warrington, T., 146n80 Washington Post, 155, 206n26 Washington Protocol of 1903, 134, 139–40 Webb, Richard, 200n17 Weidenmier, Marc D., 7n15, 9, 47n17, 115, 116nn11,13, 151n89 Weingast, Barry R., 6n11, 212, 226, 233n7, 240n23 Welles, Sumner, 154, 188 Wellons, Philip A., 200n17, 215 Wells Fargo, 197 Wendt, Alexander, 114n1 West Indies, 41n7, 52 Whitaker, John, 166n27 White, Francis, 188n71 White, John, 146n83 White, Weld & Co., 95, 97f, 107t, 171n43 Whitehead, Laurence, 115n3, 160 Willett, Thomas D., 7n12 Williamson, Jeffrey, 47n17 Williamson, John, 197n2, 198, 199n14 Wilson, Belford Hinton, 145n79, 146n82 Wilson, Robert, 227n3 Winkler, Max, 112n58, 114n2 Winter, Pieter J van, 45n14 Withers, Hartley, 74n3, 75t, 93, 104n28 Wittenberg, Jason, 63n50 Woodhouse, C M., 154 World Bank, 3n1, 84, 115n6, 202f, 209n42, 210t, 235 World War Foreign Debt Commission (U.S.), 111 Woude, Ad van der, 40n2 Wright, Brian D., 6n11, 11n28, 226n1 Wright, Mark L., 6n11, 9n22, 226n1 Wuărttemberg, 121t Wyke, Charles Lennox, 156 Wynne, William H., 133n35, 156 Wyse, Thomas, 154–55 Yafeh, Yishay, 7n16, 47n17, 69n56, 115n6, 117n16, 200n17, 234n10 yield See interest rates See also specific country Yoon, David H., 124n28 Yugoslavia (Serbia): borrowing by, 88t, 101t, 149t; compliance vs default by, 88t, 99f, 101t, 184t; gunboat diplomacy and, 121t, 149t; new vs seasoned borrowers and, 89, 93; trade sanctions and, 180n63, 184t, 191t Yuru, Wang, 179n61 Zamacona, Manuel Marı´a de, 156 Zettelmeyer, Jeromin, 159, 200n17 Zimmerman, Jeffrey A., 16n1 Zouari, Abdel Jawed, 157 Zumer, Fre´de´ric, 6n8, 47n17, 60n43, 69n56 .. .REPUTATION AND INTERNATIONAL COOPERATION REPUTATION AND INTERNATIONAL COOPERATION S O V E R E I G N D E B T AC R O S S THREE CENTURIES Michael Tomz PRINCETON UNIVERSITY PRESS PRINCETON AND. .. Cataloging-in-Publication Data Tomz, Michael Reputation and international cooperation : sovereign debt across three centuries / Michael Tomz p cm Includes bibliographical references and index ISBN-13: 978-0-691-12930-3... contributed to a better understanding of cooperation in our world REPUTATION AND INTERNATIONAL COOPERATION Part I T H E O RY Chapter The Puzzle of Cooperation in International Debt EVERY DAY, LEADERS