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Political ties and the yield curve

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  • Ambrocio, Gene
  • Hasan, Iftekhar

Abstract

We examine the effect of political ties with the US on sovereign yields and ratings at various horizons. We find beneficial effects across both short- and long-term yields and ratings. Specifically, we find that stronger political ties with the US affect mainly the level of the yield curve of foreign sovereign bonds. These results imply that the market perceives political ties with the US as having both near- and long-term beneficial consequences.

Suggested Citation

  • Ambrocio, Gene & Hasan, Iftekhar, 2023. "Political ties and the yield curve," Economics Letters, Elsevier, vol. 228(C).
    • Handle: RePEc:eee:ecolet:v:228:y:2023:i:c:s0165176523001908
    DOI: 10.1016/j.econlet.2023.111165
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    References listed on IDEAS

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    1. Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 224-240, May.
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    More about this item

    Keywords

    Political ties; Yield curve; Sovereign borrowing;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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