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Leaders, Tenure, and the Politics of Sovereign Credit

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  • Patrick E. Shea
  • Jonathan A. Solis

Abstract

Sovereign creditworthiness is as much a function of politics as economic fundamentals. Previous research has focused on the relationship between creditworthiness and political factors such as regime type, regional effects, and international organization membership. These factors, while important, often change slowly and do not always capture the more dynamic political determinants of creditworthiness. As an alternative, this study focuses on the role of leaders. We argue that leaders’ tenure reduces uncertainty in the sovereign credit market. Time in power allows leaders to better manage expectations related to sovereign credit policy of both domestic supporters and market actors. As a result, we expect that creditworthiness improves as a leader’s tenure increases. We find supporting evidence for our argument using two distinct empirical approaches: panel data analysis and a natural experiment. Our findings provide a better understanding of the relationship between leaders, politics, and sovereign credit.

Suggested Citation

  • Patrick E. Shea & Jonathan A. Solis, 2018. "Leaders, Tenure, and the Politics of Sovereign Credit," International Interactions, Taylor & Francis Journals, vol. 44(2), pages 294-320, March.
  • Handle: RePEc:taf:ginixx:v:44:y:2018:i:2:p:294-320
    DOI: 10.1080/03050629.2018.1406932
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    Cited by:

    1. Andreas Kern & Bernhard Reinsberg & Patrick E. Shea, 2024. "Why cronies don’t cry? IMF programs, Chinese lending, and leader survival," Public Choice, Springer, vol. 198(3), pages 269-295, March.

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