ABSTRACT OF THE DISSERTATION Sovereign Credit, Conflict, and International Relations

This dissertation examines why investors are willing to finance government wartime borrowing. I challenge the conventional wisdom that investors have dovish prefer-ences by arguing that investors use the uncertainty of conflict outcomes to create lucrative investment opportunities. War lending provides benefits as well as risks to lenders, and the risks are minimized if conflict do not escalate into larger campaigns. As a result, investors will favor states that tend not escalate their conflicts. To test my theory, I rely on both qualitative and quantitative methods. I ex-amine two case studies to gauge international (19th century Austria) and domestic (inter-war Europe) reaction to war. I then use event study analysis to analyze sovereign markets ’ reaction to the news of conflict. Finally, I analyze new data on sovereign lending to examine how sovereign credit costs affect decisions to initiate and escalate conflict. In sum, my analysis supports my theoretical assertions that sovereign investors are not always doves, but are rather pragmatists. My findings have implications on how we analyze war finance, state capacity, and military mo-bilization