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Credit rating agencies and elections in emerging democracies: Guardians of fiscal discipline?

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  • Hanusch, Marek
  • Vaaler, Paul M.
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    Abstract

    Analyses of budget balances in 18 emerging presidential democracies observed prior to the financial crisis of 2008–2009 show that credit rating agencies induce fiscal discipline in election years, thus reducing incentives for governments to borrow opportunistically for short-term electoral gain.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 119 (2013)
    Issue (Month): 3 ()
    Pages: 251-254

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    Handle: RePEc:eee:ecolet:v:119:y:2013:i:3:p:251-254

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Credit rating agencies; Elections; Fiscal policy; Political budget cycle;

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    1. Beck, T.H.L. & Clarke, G. & Groff, A. & Keefer , P. & Walsh, P., 2001. "New tools in comparative political economy: The database of political institutions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125517, Tilburg University.
    2. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
    3. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September.
    4. Lawrence J. White, 2010. "Markets: The Credit Rating Agencies," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 211-26, Spring.
    5. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
    6. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
    7. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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