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The Politics of Sovereign Credit Spreads

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  • Houcem Smaoui
  • Narjess Boubakri
  • Jean-Claude Cosset

Abstract

Using a large sample of 35 developing countries for the period 1993–2009, we provide strong and robust evidence that the political institutions in place play a significant role in explaining sovereign spreads. In particular, we find that unconstrained presidential systems increase spreads, while political stability and higher competition for political contest decrease spreads. In addition, political cohesion (political fragmentation) depresses (increases) spreads. Instead, the latter are insignificantly related to political orientation.

Suggested Citation

  • Houcem Smaoui & Narjess Boubakri & Jean-Claude Cosset, 2017. "The Politics of Sovereign Credit Spreads," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(8), pages 1894-1922, August.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:8:p:1894-1922
    DOI: 10.1080/1540496X.2016.1201760
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