Pickering, Andrew Christopher orcid.org/0000-0003-1545-2192 (2018) Sovereign Debt:Election Concerns and the Democratic Disadvantage. Oxford Economic Papers. ISSN 0030-7653
Abstract
We re-examine the concept of 'democratic advantage' in sovereign debt ratings when optimal repayment policies are time-inconsistent. If democratically elected politicians are unable to make credible commitments then default rates are inefficiently high, so democracy potentially confers a credit market disadvantage. Institutions that are shielded from political pressure may ameliorate the disadvantage by adopting a more farsighted perspective. Using a numerical measure of institutional farsightedness obtained from the Global Insight Business Risk and Conditions database, we find that the observed relationship between credit-ratings and democratic status is strongly conditional on farsightedness. With myopic institutions, democracy is associated with worsened credit ratings on average by about 3 investment grades. With farsighted institutions there is, if anything, a democratic advantage.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 13 Jun 2018 11:00 |
Last Modified: | 21 Jan 2025 17:33 |
Published Version: | https://doi.org/10.1093/oep/gpy036 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1093/oep/gpy036 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:132018 |