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Fashions and fads in finance: contingent emulation and the political economy of sovereign wealth fund creation. IHS Political Science Series No. 131, July 2012

Chwieroth, Jeffrey (2012) Fashions and fads in finance: contingent emulation and the political economy of sovereign wealth fund creation. IHS Political Science Series No. 131, July 2012. [Policy Paper]

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    Abstract

    Sovereign wealth funds (SWFs), government-owned or managed investment vehicles, have proliferated at a remarkable rate over the past decade, even as political controversy has surrounded them. Why? The extant literature depicts the process of SWF creation as driven by functional imperatives associated with “excess” revenue and reserves accumulated from commodity booms and large current account surpluses. I argue that SWF creation also reflects in large part a process of contingent emulation in which first this policy has been constructed as appropriate for countries with given characteristics, and then when countries took on these characteristics, they followed their peers. Put simply, fashions and fads in finance matter for policy diffusion. I assess this argument using a new dataset on SWF creation that covers nearly 80 countries from 1984 to 2007. The results suggest peer-based contingent emulation has been a crucial factor shaping the decision of many countries to create a SWF, especially among fuel exporters. An earlier version of this paper was presented at the annual meeting of the American Political Science Association, Washington, DC, 2 – 5 September 2010. The author would like to thank Eric Neumayer for his many suggestions and comments on previous versions of the manuscript. The author would also like to thank Zachary Elkins for sharing data. Finally, the author would like to acknowledge the research assistance of Natali Bulamacioglu and Christopher Gandrud.

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    Item Type: Policy Paper
    Uncontrolled Keywords: Sovereign wealth funds; macroeconomics; international political economy; investment vehicles; fuel exporters.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Institute for Advanced Studies (Vienna), Department of Political Science > IHS Political Science Series
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 21 Jan 2013 17:51
    Number of Pages: 40
    Last Modified: 27 Aug 2013 17:42
    URI: http://aei.pitt.edu/id/eprint/39281

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