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Fashions and fads in finance: contingent emulation and the political economy of sovereign wealth fund creation

Chwieroth, Jeffrey (2012) Fashions and fads in finance: contingent emulation and the political economy of sovereign wealth fund creation. Reihe politikwissenschaft/Political science series, 131/2012. Institute for Advanced Studies (IHS), Vienna, Austria.

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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.

Item Type: Monograph (Working Paper)
Official URL: http://www.ihs.ac.at/
Additional Information: © 2012 Department of Political Science, Institute for Advanced Studies (IHS)
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HJ Public Finance
Journal of Economic Literature Classification System: G - Financial Economics > G0 - General
Sets: Departments > International Relations
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 131/2012
Date Deposited: 30 Jul 2012 14:12
URL: http://eprints.lse.ac.uk/44997/

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