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

  • Hanusch, Marek
  • Vaaler, Paul M.
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    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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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176513001134
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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    1. 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.
    2. 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.
    3. Lawrence J. White, 2010. "Markets: The Credit Rating Agencies," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 211-26, Spring.
    4. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    5. Block, Steven A. & Vaaler, Paul M., 2004. "The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries," Journal of International Money and Finance, Elsevier, vol. 23(6), pages 917-946, October.
    6. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
    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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