The Limits of Hegemony: Banks, Covert Actions, and Foreign Firms
52 Pages Posted: 27 Oct 2021 Last revised: 26 Apr 2022
Date Written: April 1, 2022
Abstract
Economic sanctions and covert actions from hegemonic states are common tools used to influence other countries. Less is known about non-state actors such as banks and their impact across borders. We use new firm-level data from Chile to document a substantial decrease in financial relations with U.S. banks after socialist Salvador Allende took office in 1970. An analysis of links with banks from other countries reveals that part of the decrease was specific to the U.S. banking sector. Business reports and stock prices suggest that firms were mostly unaffected by the destruction of links with U.S. banks. Substitution of financial relations towards state-owned banks appears to be the key mechanism to explain these findings.
Keywords: firms, banks, Cold War, United States, Richard Nixon, Salvador Allende.
JEL Classification: N2, N4
Suggested Citation: Suggested Citation