Divided Government, Political Turnover, and State Bond Ratings
Credit markets face an inherent risk that derives from future policy changes when considering the purchase of debt issued by state governments. An enacting government coalition issuing long-term debt cannot make a credible commitment to maintain the existing debt repayment policy into the future. In...
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| Veröffentlicht in: | Public finance review 2008-05, Vol.36 (3), p.259-286 |
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| container_title | Public finance review |
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| creator | Krueger, Skip Walker, Robert W. |
| description | Credit markets face an inherent risk that derives from future policy changes when considering the purchase of debt issued by state governments. An enacting government coalition issuing long-term debt cannot make a credible commitment to maintain the existing debt repayment policy into the future. In the face of this commitment problem, investors (and the rating agencies that serve those investors) look to recent political turnover and the existence of divided government to estimate the possibility that some future government coalition will remain substantially similar to the enacting coalition. Political turnover and divided government suggest to the credit markets that future coalitions may act opportunistically regarding debt repayment. This risk of opportunistic behavior, we argue, manifests in lower ratings of state debt. We empirically examine this claim in a model of state bond ratings from 1995 through 2000. |
| doi_str_mv | 10.1177/1091142107309229 |
| format | Article |
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We empirically examine this claim in a model of state bond ratings from 1995 through 2000.</description><identifier>ISSN: 1091-1421</identifier><identifier>EISSN: 1552-7530</identifier><identifier>DOI: 10.1177/1091142107309229</identifier><language>eng</language><publisher>Los Angeles, CA: SAGE Publications</publisher><subject>Bond markets ; Bond ratings ; Bonds ; Coalitions ; Credit ; Credit market ; Data analysis ; Debt ; Debts ; Deficit financing ; Divided Government ; Economic models ; Economic policy ; Federal states ; Fiscal Policy ; Government ; Local Government ; Political Change ; Politics ; Public Finance ; Rating ; Repayments ; Studies ; U.S.A</subject><ispartof>Public finance review, 2008-05, Vol.36 (3), p.259-286</ispartof><rights>Copyright SAGE PUBLICATIONS, INC. 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| ispartof | Public finance review, 2008-05, Vol.36 (3), p.259-286 |
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| source | Access via SAGE; PAIS Index; Worldwide Political Science Abstracts; Alma/SFX Local Collection |
| subjects | Bond markets Bond ratings Bonds Coalitions Credit Credit market Data analysis Debt Debts Deficit financing Divided Government Economic models Economic policy Federal states Fiscal Policy Government Local Government Political Change Politics Public Finance Rating Repayments Studies U.S.A |
| title | Divided Government, Political Turnover, and State Bond Ratings |
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