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Domestic Political Unrest and Sovereign Bond Ratings in the Developing World

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  • Glen Biglaiser
  • Hoon Lee
  • Ronald J. McGauvran

Abstract

This paper integrates the credit rating agency and domestic conflict literatures, investigating the effects of non-violent and violent domestic political unrest on sovereign bond ratings. Using up to 60 developing countries and 94 unrest cases from 1996-2018, we find that while countries under domestic unrest often receive bond downgrades, non-violent unrest appears not to be responsible. Further, we use mediation analysis and show that respect for the rule of law and economic stability seem to mediate the relationship between violent and non-violent unrest and bond ratings. Given developing countries' need to issue debt, and the critical role credit rating agencies play in rating sovereign bonds, our work suggests that countries should seek to avoid violent domestic political unrest if for no other reason than to acquire lower-cost capital.

Suggested Citation

  • Glen Biglaiser & Hoon Lee & Ronald J. McGauvran, 2024. "Domestic Political Unrest and Sovereign Bond Ratings in the Developing World," Journal of Conflict Resolution, Peace Science Society (International), vol. 68(7-8), pages 1580-1607, August.
  • Handle: RePEc:sae:jocore:v:68:y:2024:i:7-8:p:1580-1607
    DOI: 10.1177/00220027231195383
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    References listed on IDEAS

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