Political Sources of Risk in the International Money Markets: Conceptual, Methodological, and Interpretive Refinements
- PDF / 1,735,131 Bytes
- 4 Pages / 523.8 x 799.2 pts Page_size
- 56 Downloads / 153 Views
* The purpose of this paper is to suggest refinements in the analysis of political risks in the international money markets; thus, it attempts to expand and clarify the dimensions of a domain of analysis that has been highlighted by Aliber's pioneering theoretical and empirical work [1973; 1978] and that has been the object of a careful study by Dooley and Isard [1980]. Inasmuch as the topic seems likely to spawn further empirical work, it is appropriate to consider some basic issues and promising directions for future studies. Three themes are developed herein:1. the measurement of political risk needs to be more precise. Previously used measures have been based on imprecise concepts of the pertinent risks, and they have been contaminated by inclusion of extraneous variables in the operational indicators; 2. the search for explanatory/ predictor variables related to variations in political risk should be expanded and redirected into the domain of political analysis. Despite their semantics, previous studies have alluded only barely to the politics of political risk; and 3. that assumptions about market efficiency require reconsideration in light of an analysis of the political sources of risk in the international money market. Previous notions of market efficiency have not accounted adequately for either the role of political information or interpretations of it in the market.
INTRODUCTION
One conceptual issue concerns the precise specification of the type of risk of concern. There are several distinctions which are suggestive-for instance, exchange controls versus exchange rate changes-but the term exchange controls is used commonly to cover a remarkablydiverse array of methods whereby governments try to restrain flows of funds. At a conceptual level, therefore, "political" (exchange control) risks can be distinguished from other forms of exchange control effects and from other forms of risk. The measurement of that political risk on the basis of operational indicators, however, is another matter. Aliber measures it as the excess portion of crossnational interest agios beyond that attributable to interest rate parity and/or transaction costs; however, one cannot necessarily infer political risk from what is essentially a residual datum, or what remains after other familiar economic
TYPES OF RISK AND THEIR INDICATORS
*Thomas L. Brewerwas in the Doctoral Studies Programin Business Administrationat the Universityof Michigan where he has been a Visiting Lecturerin InternationalBusiness. He is also Professor of Political Science at Eastern Michigan Universityand the author of numerous publications in internationalrelations. The author is indebted to GunterDufey for comments on an earlier draft of this article.
Journal of International Business Studies, Spring/Summer 1983
161
Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve, and extend access to Journal of International Business Studies ® www.jstor.org
variables have been taken into account. Although the remaining portion of the in
Data Loading...
