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Subject = Political economics;
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Elections and sovereign debt in advanced economies
(2013)
McMenamin, Iain; Breen, Michael; Portillo, Juan Munoz
Elections and sovereign debt in advanced economies
(2013)
McMenamin, Iain; Breen, Michael; Portillo, Juan Munoz
Abstract:
This article argues that advanced economies never eradicated political risk. We demonstrate that elections had large impacts on the long-term interest rates of nineteen countries in 130 elections over thirty years. Using an event-study methodology, we calculate that the resolution of uncertainty on the announcement of election results reduces interest rates. Very little of the variation is explained by economic variables. By contrast, familiar variables from comparative politics provide powerful explanations of variation in the impact of elections on borrowing rates. The biggest is ideology: the larger the swing towards the right in the parliament the larger the reduction in the interest rate. Two other variables also matter through their role in uncertainty. Close elections increase uncertainty during the campaign, leading to a greater reduction in uncertainty when the result is announced and a drop in the interest rate. By contrast, consensual institutions reduce uncertain...
http://doras.dcu.ie/18358/
Displaying Results 1 - 1 of 1 on page 1 of 1
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