This dissertation is a pooled time series, cross-sectional, quantitative study of the impact of international financial transfer on the level of democracy. The study covers 174 developed and developing countries from 1976 through 1994. Through evaluating the democracy and democratization literature and other studies, the dissertation develops a theory and testable hypotheses about the impact of the international variables foreign aid and foreign direct investment on levels of democracy. This study sought to determine whether these two financial variables promote or nurture democracy and if so, how? A pooled time-series cross-sectional model is developed employing these two variables along with other relevant control variables. Control variables included the presence of the Cold War and existence of formal alliance with the United States, which account for the strategic dimension that might affect the financial transfer - level of democracy linkage. The model also includes an economic development variable (per capita Gross National Product) to account for the powerful impact for economic development on the level of democracy, as well as a control for each country's population size. By addressing and the inclusion of financial, economic, strategic, and population size effects, I consider whether change in these variables affect the level of …