No CrossRef data available.
Article contents
Institutionalizing the autocratic penalty away: fiscal rules, autocracy, and sovereign financial market access
Published online by Cambridge University Press: 20 September 2022
Abstract
The “democratic advantage” in access to credit markets has been vigorously researched. Recent research has found that this “autocratic disadvantage” can be partly countered by other factors. However, this research agenda has largely ignored an increasingly important type of institution of direct importance for national fiscal policy, fiscal rules. This article argues that fiscal rules alleviate the “autocratic disadvantage” in sovereign bond market access. This argument is tested on a dataset on fiscal rules and sovereign bond issuing data covering 121 countries from 1990 to 2015. The results provide substantial evidence in favor of the argument, autocracies with fiscal rules face no disadvantage in bond market access and might even be more likely to issue new government bonds than democracies.
- Type
- Research Note
- Information
- Copyright
- Copyright © The Author(s), 2022. Published by Cambridge University Press on behalf of the European Political Science Association
References
Aaskoven, L and Grundholm, AT (2021) Stability through constraints: the impact of fiscal rules on autocratic survival. Democratization 28, 1564–1582.10.1080/13510347.2021.1947249CrossRefGoogle Scholar
Ahmed, FZ (2019) The Perils of International Capital. Cambridge: Cambridge University Press.10.1017/9781108771146CrossRefGoogle Scholar
Arias, E, Hollyer, JR and Rosendorff, BP (2018) Cooperative autocracies: leader survival, creditworthiness, and bilateral investment treaties. American Journal of Political Science 62, 905–921.10.1111/ajps.12383CrossRefGoogle Scholar
Asatryan, Z, Castellón, C and Stratmann, T (2018) Balanced budget rules and fiscal outcomes: evidence from historical constitution. Journal of Public Economics 167, 105–119.10.1016/j.jpubeco.2018.09.001CrossRefGoogle Scholar
Badinger, H and Reuter, WH (2017) The case for fiscal rules. Economic Modelling 60, 334–343.10.1016/j.econmod.2016.09.028CrossRefGoogle Scholar
Ballard-Rosa, C, Mosley, L and Wellhausen, RL (2019) Contingent advantage? Sovereign borrowing, democratic institutions and global capital cycles. British Journal of Political Science 51, 353–373.10.1017/S0007123418000455CrossRefGoogle Scholar
Baunsgaard, T (2003) Fiscal Policy in Nigeria: Any Role for Rules?. IMF Working Paper 03/155.CrossRefGoogle Scholar
Beaulieu, E, Cox, GW and Saiegh, S (2012) Sovereign debt and regime type: reconsidering the democratic advantage. International Organization 66, 709–38.10.1017/S0020818312000288CrossRefGoogle Scholar
Biglaiser, G and Staats, JL (2012) Finding the “democratic advantage” in sovereign bond ratings: the importance of strong courts, property rights protection, and the rule of law. International Organization 66, 515–535.10.1017/S0020818312000185CrossRefGoogle Scholar
Block, SA and Vaaler, PM (2004) The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries. Journal of International Money and Finance 23, 917–946.10.1016/j.jimonfin.2004.05.001CrossRefGoogle Scholar
Bodea, C and Hicks, R (2018) Sovereign credit ratings and central banks: why do analysts pay attention to institutions?. Economics & Politics 30, 340–365.10.1111/ecpo.12113CrossRefGoogle Scholar
Boix, C, Miller, M and Rosato, S (2013) A complete data set of political regimes, 1800–2007. Comparative Political Studies 46, 1523–1554.10.1177/0010414012463905CrossRefGoogle Scholar
Clay, KC and Matthew, D (2017) The physical consequences of fiscal flexibility: sovereign credit and physical integrity rights. British Journal of Political Science 47, 783–807.10.1017/S0007123415000502CrossRefGoogle Scholar
Copelovitch, M, Gandrud, C and Hallerberg, M (2018) Financial data transparency, international institutions, and sovereign borrowing costs. International Studies Quarterly 62, 23–41.10.1093/isq/sqx082CrossRefGoogle Scholar
Curristine, T, Baldrich, J, Crooke, M and Gonguet, F (2017) Brazil: Supporting Implementation of the Expenditure Rule Through Public Financial Management Reforms. IMF Country Report No. 17/292.Google Scholar
Dhillon, A, Pickering, A and Sjöström, T (2019) Sovereign debt: election concerns and the democratic disadvantage. Oxford Economic Papers 71, 320–343.10.1093/oep/gpy036CrossRefGoogle Scholar
DiGuiseppe, M and Shea, PE (2015) Sovereign credit and the fate of leaders: reassessing the “democratic advantage”. International Studies Quarterly 59, 557–570.10.1111/isqu.12181CrossRefGoogle Scholar
Garriga, AC (2016) Central bank independence in the world: a new dataset. International Interactions 42, 849–868.10.1080/03050629.2016.1188813CrossRefGoogle Scholar
Gehlbach, S and Keefer, P (2012) Private investment and the institutionalization of collective action in autocracies: ruling parties and legislatures. Journal of Politics 74, 621–635.10.1017/S0022381611001952CrossRefGoogle Scholar
Hansen, D (2020) The effectiveness of fiscal institutions: international financial flogging or domestic constraint?. European Journal of Political Economy 63, 1018779.10.1016/j.ejpoleco.2020.101879CrossRefGoogle Scholar
Hollyer, JR, Rosendorff, BP and Vreeland, JR (2011) Democracy and transparency. Journal of Politics 73, 1191–1205.10.1017/S0022381611000880CrossRefGoogle Scholar
Kelemen, RD and Teo, TK (2014) Law, focal points, and fiscal discipline in the United States and the European Union. American Political Science Review 108, 355–370.CrossRefGoogle Scholar
Lledó, V, Yoon, S, Fang, X, Mbaye, S and Kim, Y (2017) Fiscal Rules at a Glance. Washington, D.C.: International Monetary Fund.Google Scholar
Lúhrmann, A and Lindberg, SI (2019) A third wave of autocratization is here: what is new about it?. Democratization 26, 1095–113.10.1080/13510347.2019.1582029CrossRefGoogle Scholar
North, DC and Weingast, BR (1989) Constitutions and commitment: the evolution of institutions governing public choice in seventeenth-century England. The Journal of Economic History 49, 803–832.CrossRefGoogle Scholar
Schaechter, A, Kinda, T, Budina, N and Weber, A (2012) Fiscal Rules in Response to the Crisis—Towards the “Next-Generation” Rules. A New Dataset. IMF Working Paper 12/187.Google Scholar
Schultz, KA and Weingast, BR (2003) The democratic advantage: institutional foundations of financial power in international competition. International Organization 57, 3–42.10.1017/S0020818303571065CrossRefGoogle Scholar
Shea, PE and Solis, JA (2018) Leaders, tenure, and the politics of sovereign credit. International Interactions 44, 294–320.CrossRefGoogle Scholar
Standard and Poor's (2016a). Research Update: Republic of Colombia Outlook Revised To Negative On External Weakness; “BBB/A-2” Foreign Currency Ratings Affirmed. S&P Global Ratings 16th February 2016.Google Scholar
Standard and Poor's (2019b). Serbia Upgraded To “BB+” On Resilient Macroeconomic Fundamentals; Outlook Positive. S&P Global Ratings 13th December 2019.Google Scholar
Stasavage, D (2002) Credible commitment in early modern Europe: North and Weingast Revisited. The Journal of Law, Economics and Organization 18, 155–186.10.1093/jleo/18.1.155CrossRefGoogle Scholar
Stasavage, D (2016) What we can learn from the early history of sovereign debt. Explorations in Economic History 59, 1–16.10.1016/j.eeh.2015.09.005CrossRefGoogle Scholar
Thornton, J and Vasilakis, C (2018) Fiscal rules and government borrowing costs: international evidence. Economic Inquiry 56, 446–459.CrossRefGoogle Scholar
Aaskoven supplementary material
Appendix
PDF
980.9 KB