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Political Instability and Debt Maturity

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  • Miller, Victoria

Abstract

Political instability has been blamed for many poor macroeconomic outcomes, such as high inflation, unemployment, and low growth. The author proposes yet another negative consequence of political instability: political instability and polarization generate inflation uncertainty which causes the term structure to steepen, consequently political instability and polarization reduce the average maturity and increase the expected cost of debt. A model is derived which illustrates these relationships. Political instability and polarization are then proxied and shown to be inversely related to debt maturity for a sample of OECD countries. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Miller, Victoria, 1997. "Political Instability and Debt Maturity," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 12-27, January.
    • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:1:p:12-27
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    Cited by:

    1. Falcetti, Elisabetta & Missale, Alessandro, 2002. "Public debt indexation and denomination with an independent central bank," European Economic Review, Elsevier, vol. 46(10), pages 1825-1850, December.
    2. Valev, Neven T., 2007. "Uncertainty and international debt maturity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(4), pages 372-386, October.
    3. Li, Xiang & Su, Dan, 2020. "How does economic policy uncertainty affect corporate debt maturity?," IWH Discussion Papers 6/2020, Halle Institute for Economic Research (IWH).
    4. Sana Zouari & Dhafer Saidane & Foued Badr Gabsi, 2022. "Private sector financing: linear and quadratic effects of domestic public debt on bank credit supply," Economics Bulletin, AccessEcon, vol. 42(2), pages 372-387.
    5. Valev, Neven T., 2006. "Institutional uncertainty and the maturity of international loans," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 780-794, August.
    6. Mahmut Yardimcioglu & Ahmet Ilhan, 2016. "A Study Regarding the Advances of Political Stability and Economic Development Experienced in Turkey during the Periods of 1980-2015," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(10), pages 167-175, October.
    7. Tobignaré Yabré & Gervasio Semedo, 2021. "Political stability and fiscal consolidation in sub‐Saharan African countries," The World Economy, Wiley Blackwell, vol. 44(4), pages 1077-1109, April.
    8. Li, Xiang, 2022. "How does economic policy uncertainty affect corporate debt maturity?," IWH Discussion Papers 5/2022, Halle Institute for Economic Research (IWH).
    9. Mehl, Arnaud & Reynaud, Julien, 2005. "The determinants of "domestic" original sin in emerging market economies," Working Paper Series 560, European Central Bank.
    10. Janice Boucher Breuer, 2004. "An Exegesis on Currency and Banking Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 18(3), pages 293-320, July.

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