A defining feature of the post-World War II global order has been the continued integration of national economies, and much scholarship has investigated the general impact which this integration has had on national outcomes ranging from development (both economic and political) to security (whether it impacts the likelihood of war). In this dissertation, I examine not simply integration itself but the manner of integration which has an important influence on world affairs. Specifically, I investigate what conditions render a country vulnerable to international financial markets, and what impact this financial vulnerability has on important national outcomes. In the first chapter, I examine a long-held theory of financial market discipline which argues that market exposure induces prudent fiscal policies by governments. To date, there has not been a clear and systematic demonstration that markets actually have this effect, and so here I theorize the most likely market conditions which may give rise to fiscal discipline. While I demonstrate that there is little evidence in favor of the market discipline hypothesis, I highlight alternate pathways of political competition which do lead to improvements in fiscal budgeting practices.In the second chapter, I examine another widely held theory, that democratic institutions foster the credibility of debt repayment, the so called “democratic advantage”. Focusing on developing countries, I show that democracies under financial stress – countries with high levels of debt and low levels of foreign exchange reserves – actually have worse sovereign credit ratings than their autocratic counterparts. I argue that this occurs because democratic institutions can inhibit or slow a policy response when there is a pressing need for economic adjustment. Further illustrating the causal mechanism, I show that high debt levels reduce credit ratings, but only in more democratic countries. I therefore show that when debt commitments are most difficult uphold, in the developing world autocracies actually fare better than democracies, offering an important theoretical advance in how we understand democratic institutions relate to economic stability.In the last chapter, I examine an important dilemma in economic statecraft – that the use of human rights sanctions has the perverse effect of worsening a countries’ human rights practices. Drawing on a similar conception of financial vulnerability, I argue that countries with high levels of financial vulnerability will more closely approximate the ability of the ruling elite to suffer financial hardship as a consequence of the sanctions, in ways unexplained simply by economic wealth alone. As a consequence, I show that, contrary to the literature, financially vulnerable countries actually improve their human rights practices when sanctions are imposed. This therefore demonstrates that sanctions can have a positive impact even in difficult cases which aim to coerce national use of repressive strategies. It further highlights the types of sanctions tools which are most like to be efficacious given a countries exposure to the world economy.
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