The Monetary Straitjacket: Official Dollarization and the Structural Capacity for Interstate Peace 

Rachael A. Agoncillo
Dr. Michael Rudy, Faculty Mentor

Can a state still afford to go to war if it no longer controls its own monetary system? While traditional theories suggest that democracy or trade prevents conflict, this research advances Monetary Peace Theory. I argue that a state’s ability to sustain militarized disputes is fundamentally restricted by its method of war finance. When a state adopts a foreign currency, it relinquishes monetary sovereignty, creating a fiscal "straitjacket" that limits rapid military mobilization. Utilizing a pre-test/post-test comparative design across U.S. Dollar and Euro zones, I analyze longitudinal data from the Correlates of War (COW) and SIPRI datasets. By controlling for geographic distance, alliances, and power parity, this study examines whether the loss of monetary autonomy creates a measurable structural break in militarized behavior that diplomacy alone cannot explain.

Keywords: Monetary Peace Theory, War Finance, Miiltarized Interstate Disputes (MIDs), Monetary Sovereignty, International Political Economy, Correlates of War (COW)

Topic(s):Political Science
Economics

Presentation Type: Oral Presentation

Session: TBA
Location: TBA
Time: TBA