Countries with open capital markets tend to have fewer militarized disputes and wars. Gartzke, Li & Boehmer propose that this association arises from the enhanced ability of states with open capital markets to credibly signal resolve through the bearing of economic costs ex ante to militarized escalation. We test this causal mechanism by qualitatively examining six crucial cases in which the mechanism is most likely to be operative and observable. We employ a formal case selection strategy designed to yield cases with high inferential leverage for our confirmatory test and to select cases for an exploratory analysis of scope conditions. Through analysis of media reports, government documents, and other sources, we evaluate the extent to which relevant individuals drew the appropriate inferences about market-mediated costs and resolve. We conclude that while market-mediated signaling may operate in major conflicts, it is unlikely to account for much of the association between capital openness and peace. Exploratory analysis of our cases identifies potential scope conditions, clarifies the role of different signaling mechanisms, and suggests other explanations for the peaceful behavior of countries with open capital markets.
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