Lecturer/Assistant Professor
School of Political Science and International Studies
University of Queensland
Michael A. Gavin
Publications
Michael A. Gavin "Central banks and sovereign debt credibility before 1914," British Journal of Political Science (forthcoming).
Lending to governments is risky, as creditors may have little recourse in the event of default. Research shows that historical and contemporary central banks enhance sovereign credibility and reduce sovereign borrowing costs. However, the reasons why are debated. Two views are evident in the literature. A constraints view argues that central banks raise default costs and thereby constrain wayward fiscal behaviour. An information view argues that central bank design can signal sovereign credibility, informing investors about inherently unobservable repayment commitments. Using a formal model and a large dataset of the functions assigned to central banks established between 1600 and 1914, I devise a test to adjudicate between these views. Results show that central bank functions purported to constrain fiscal spending do not produce sustained reductions in sovereign borrowing costs and even raise default risk during conflict. Conversely, central banks that support market actors signal fiscal credibility and produce sustained reductions in borrowing costs. These findings support an information-based account of sovereign credibility and show that the credibility effects of institutions depend on how design choices are interpreted by market actors.
Ana Carolina Garriga and Michael A. Gavin. "Influence by omission: The IMF's lending capacity and central bank design," The Review of International Organizations (forthcoming). Supplementary Appendix. Data.
A large literature explores how loan conditionalities and policy recommendations embedded in International Monetary Fund lending programs influence country behavior and policy choices. We argue that the IMF’s influence extends beyond these intentional efforts. This paper shows that the growth in the IMF’s lending capacity has failed to keep pace with financial globalization, and that this has incentivized emerging and developing economies to strengthen their domestic institutions for financial stability, particularly, their central bank’s capabilities to act as a lender of last resort. We conceptualize this as influence by omission, whereby the IMF shapes behavior not through direct engagement but through its declining ability to serve as an effective financial backstop. Using original data coding central bank lender of last resort powers for 60 developing countries between 1994 and2020, we find that countries with relatively limited access to IMF resources are significantly more likely to strengthen their central banks’ lender of last resort authority. This finding is robust across a range of model specifications, instrumental variable analyses, and dynamic estimations. An event study of countries’ response to the Covid shock reveals that countries with stronger lending of last resort capabilities were much more likely to manage the crisis without drawing on IMF resources. Importantly, this effect is specific to lender of last resort powers and does not extend to other aspects of central bank governance such as independence or transparency, suggesting that distinct international and domestic incentives shape different reform trajectories.
Michael A. Gavin. "Interest groups and central bank credit policies: Evidence from 1600-1914", Comparative Political Studies, 59(2), pp. 410-438. Supplementary Appendix. Data.
Before the nineteenth century, nearly all central banks financed government spending, but as the centuries passed direct government financing became taboo. Using original data from 69 central banks established between 1600-1914, this study traces a shift away from government financing and towards increased support for private sector credit via discounting commercial bills of exchange beginning in the eighteenth century. What drove this transformation in central bank credit policies? Evidence suggests that central bank credit policies are driven by the composition of a government's supporting coalition, rather than structural economic forces. Security interests motivate governments to establish central banks that lend back to themselves, while economic interests motivate governments to establish central banks that discount bills of exchange. Discrete time survival analysis supports these contentions. This research highlights how political-historical context and the salience of specific interest groups shaped the long-term evolution of central banking.
Michael A. Gavin and Mark Manger (2023). "Populism and de facto central bank independence",
Comparative Political Studies, 56(8), pp. 1189–1223. Supplementary appendix. Data.
Although central bank independence is a core tenet of monetary policymaking, it remains politically contested: In many emerging markets, populist governments are in frequent public conflict with the central bank. At other times, the same governments profess to respect the monetary authority’s independence. We model this conflict drawing on the crisis bargaining literature. Our model predicts that populist politicians will often bring a nominally independent central bank to heel without having to change its legal status. To provide evidence, we build a data set of public pressure on central banks by classifying over 9000 analyst reports using machine learning. We find that populists are more likely than non-populists to exert public pressure on the central bank, unless checked by financial markets, and also more likely to obtain interest rate concessions. Our findings underscore that de jure does not equal de facto central bank independence in the face of populist pressures
Michael A. Gavin (2020). ``Global club goods and the fragmented global financial safety net,'' International Studies Quarterly, 64(4), pp. 798–807. Supplementary appendix.
It is generally regarded that a robust global financial safety net is a global public good. Yet public goods models that explain the existence of the global financial safety net cannot also explain why it is highly fragmented and provisioned so inequitably. This study shows that the global financial safety net's existence, fragmentation, and inequitable coverage can be explained by modelling the global financial safety net as a global club good. The primary finding of the model is that when a state has a monopoly on the provision of a non-rival and excludable good (i.e., a club good), separate multilateral and bilateral club governance structures emerge, each with a unique structure and cost. Brief case studies of the global financial safety net provisioned by the International Monetary Fund, the Federal Reserve, and the Bank for International Settlements support the model.
Michael A. Gavin (2020). ``Independent central banks and banking crisis liquidity'', The Review of International Organizations, 15(1), pp. 109–131. Data. Code. Placebo analysis. Tables. Figures.
This study develops and tests a formal model that shows why central banks protected from direct government borrowing supply a larger financial safety net for commercial banks during a crisis. This result is derived from a novel model of central bank independence grounded in the rules governing access to the central bank’s balance sheet, rather than in the politics of inflation. Subsequent analysis shows that this result is mediated by the degree of leverage in the banking system, but only in democracies where government borrowing restrictions are credible. Supporting quantitative evidence comes from an event study on a large sample of emerging market banking crises between 1980-2009.
Bernard, Jean-Thomas, Michael Gavin, Lynda Khalaf, and Marcel Voia (2015). "Environmental Kuznets curve: Tipping points, uncertainty and weak identification." Environmental and Resource Economics 60(2), pp. 285-315.
In progress
Funding the Fund: The politics of actually paying for global pubic goods
(in progress)
The International Monetary Fund is widely regarded as providing a global public good whose funding is vulnerable to problems of collective action, such as free-riding and moral hazard. However, across decades of IMF Annual Meetings, when member states discuss the IMF's resources they consistently express a willingness to contribute more to the IMF, not less, and rarely mention collective action problems. Why? And if most governments publicly support a stronger IMF, why is it still generally under-provided? I argue that increases to the Fund's resources are more likely when doing so satisfies the interests of the IMF's principal creditor states. I test this argument using a new measure of country satisfaction with the IMF’s lending capacity derived from more than 3,000 Annual Meeting speeches spanning 1946–2024. The analysis shows that calls for greater resources are disproportionately voiced by countries that anticipate relying on IMF financing, and that such calls are more likely to translate into actual resource increases when they are made by states that are politically aligned with, or economically important to, the Fund's principal creditors. These findings build on existing studies of IMF lending behavior (i.e., loan approval, size, and conditionality) to show that the IMF's principal creditors also shape decisions over funding the Fund itself, and therefore the politics of global public good provision.
Book
Funding the Fund: The politics of paying for global public goods
Conventional wisdom suggests that dilemmas of collective action, such as concerns over free-riding and moral hazard, constrain the supply of global public goods.
How, then, are global public goods such as the International Monetary Fund (IMF, or Fund) actually financed in practice? This question is surprisingly under-examined in international relations scholarship.
The broad contribution from my book is to challenge the notion that funding the Fund, and funding global public goods more generally, are constrained by dilemmas of collective action. Instead, I argue that funding the Fund, which in turn sets the IMF's capacity to assist countries in crisis, emerges from deep-seated conflicts between non-OECD countries (i.e., potential borrowers) and the IMF’s major creditors, the G4 of the United States, the United Kingdom, Germany, and France.
A distinctive feature of my project is its empirical strategy. Drawing on more than six decades of IMF Annual Meeting speeches, I code country speeches to classify governments’ publicly expressed views on the adequacy of the IMF's resources. The resulting dataset contains more than 3,000 country-year observations from over 180 member states and, to my knowledge, is the first long-run cross-national measure of stated preferences over the scale of the IMF's lending capacity.
Initial findings include that, across decades of IMF Annual Meetings, nearly all non-OECD countries express a strong, unequivocal willingness to contribute more to the Fund while the G4 are far more cautious and wary. In the empirical analysis I find that IMF funding increases only when dissatisfaction with the adequacy of the IMF's lending capacity is voiced by states that are politically aligned with, or economically integrated with, the G4.
Overall, I argue that funding the Fund is a process inextricably tied to the political and economic relationships linking borrower and creditor countries and that overcoming dilemmas of collective action play almost no role.
Dissertation
Financial Safety Nets in Emerging Market Economies
Presentations (selected)
"Funding the Fund: The politics of paying for global pubic goods," presented at the American Political Science Association Annual Conference, Boston, USA, September 2026
“Beyond conditionality: how the IMF's balance sheet unintentionally impacts central bank design," presented with at the American Political Science Association Annual Conference, Montreal, Canada, September 2022
“De Facto and De Jure Central Bank Independence," co-presented with Mark Manger at the American Political Science Association Annual Conference, Washington, D.C., USA, September 2019
“Global and domestic financial safety nets: economically additive, politically substitutable options for financial stability promotion,” the Political Economy of Finance conference for early career researchers, Oxford University, October 2018
“Global & Domestic Financial Safety Nets and Banking Crises," presented at the American Political Science Association Annual Conference, Boston, USA, September 2018
“Where are All the Banking Crises?” presented at the Midwest Political Science Association Annual Conference, Chicago, USA, April 2018
“Central Bank Financial Strength and Banking Crises in Emerging Market Presentations Economies” co-presented with Mark Manger at the American Political Science Association Annual Conference, San Francisco, USA, September 2017
“Why is There No International Lender of Last Resort?” presented at the Midwest Political Science Association Annual Conference, Chicago, USA, April 2017
“Politics and Financial Risk in Emerging Market Economies,” presented at the Friday International Relations Seminar and Tea! (FIRST) in the Department of Political Science, University of Toronto, September 30, 2016
“Capital Flows, Exchanges Rates, and the Political Economy of High Beta Presentations Economies” presented at the American Political Science Association Annual Conference, Philadelphia, USA, September 2016
“Capital Flows, Exchanges Rates, and the Political Economy of High Beta Economies” (with Mark Manger) co-presented at the European Political Science Association Annual Conference, Vienna, Austria, June 2015
“The Environmental Kuznets Curve: Tipping Points, Uncertainty, and Weak Identification” (with Jean-Thomas Bernard, Lynda Khalaf, and Marcel Voia) presented at Computational and Financial Econometrics Annual Conference, London, UK, December 2010