Economics 113: American Economic History: The First Month Audio Files
A Berkeley Joke

Eric Chaney (2007), "Assessing Pacification Policy in Iraq: Evidence from Iraqi financial Markets"

Ah. I cannot find this paper by Berkeley graduate student Eric Chaney from last spring anywhere on the internet. So here it is:

Eric Chaney (2007), "Assessing Pacification Policy in Iraq: Evidence from Iraqi financial Markets" (Berkeley: U.C. Berkeley Department of Economics).

At the end of January 2006 the Iraqi government issued roughly $2.7 billion of debt in exchange for over $20 billion of Saddam-era commercial claims. I use variation in the price of this sovereign debt to evaluate pacification policy in Iraq. Structural change models are run in conjunction with conventional event study analysis. The techniques applied provide an additional vehicle to "objectively" inform policy in areas where data collection is difficult and policies are time sensitive. Results suggest that sectarian violence was the biggest threat to Iraqi stability in the period analyzed. I find that military operations alone did not sufficiently address Iraq's security problems. The market viewed political negotiations between the interested parties as the most effective stabilization policy. It appears, however, that negotiations among Iraqi parties have reached a dead-end. In the absence of regional (especially Iranian) cooperation the prospects for Iraq's current government seem dim.

Michael Greenstone cites Eric's paper in Michael Greenstone (2007), "Is the 'Surge' Working? Some New Facts" (Cambridge: MIT):

I especially thank Eric Chaney for alerting me to the existence of Iraqi government bonds...

Background. Before analyzing these time series, it is informative to know the history of the Iraqi bonds, some details on how bonds are priced on secondary bond markets, and why it is reasonable to assume that world financial markets can efficiently aggregate the available information on Iraq’s future. Prior to Iraq’s invasion of Kuwait in 1990, Iraq issued about $130 billion in debt. After the Gulf war, they defaulted on this debt. When the US led coalition invaded Iraq in 2003, the holders of this debt were spread around the world. The Paris Club held claims of approximately $40 billion, Persian Gulf creditors had another $65 billion and the remainder was in the hands of commercial creditors (Chaney 2007)...

A trader at JP Morgan said that "As much as 90% may have gone from the original holders (banks, trading companies, engineering firms etc., i.e., not investment funds) to investment funds. And of that [the bond are] are about evenly split between hedge funds and “real money” accounts (maybe slightly more in “real money”)." [Quoted in Chaney (2007), page 4]. Further there has been substantial trading of these bonds; about $4.1 billion of these bonds were traded in the first quarter of 2006 when they were issued and roughly $1.6 billion in the second quarter (Chaney 2007)...