The Value of Institutions for Financial Markets: Evidence From Emerging Markets
IMF Working Papers, February 1, 2009
Source details
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- The Value of Institutions for Financial Markets: Evidence From Emerging Markets
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Bibliographic details
- Authors: Thomas Stratmann, Bernardin Akitoby
- Published: February 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871746.001
Summary findings
- This paper investigates the value of political institutions for financial markets, using panel data from emerging market countries.
- Tests the hypothesis that changes in political institutions, such as improvements in democratic rights and increased government accountability, have a direct effect on sovereign interest rate spreads.
- Findings:
- Financial markets value institutions over and above the economic and fiscal outcomes these institutions shape.
- Democracy and accountability generally lower sovereign spreads.
- Political risk tends to increase sovereign spreads.
- Financial markets tend to view election years negatively.
Research design and scope
- Unit of analysis: emerging market countries (panel data).
- Main dependent variable: sovereign interest rate spreads.
- Institutional variables examined include democratic rights and government accountability.
- Analytical focus: whether institutional changes have a direct effect on sovereign spreads, separate from economic and fiscal outcomes.
Subjects and keywords
- Subjects: Current spending, Expenditure, Fiscal policy, Housing, Inflation, National accounts, Output gap, Prices, Production
- Keywords: country indicator, Current spending, debt ratio, default history, emerging markets, financial markets, fiscal policy variable, Global, government institution, Housing, Inflation, inflation rate, institutions, interest rates spread, Output gap, presidential system, sovereign risk, spread, spread index, spreads, WP
Source: IMF Working Paper — The Value of Institutions for Financial Markets: Evidence From Emerging Markets (Thomas Stratmann; Bernardin Akitoby), February 1, 2009.