Abstract
This study examines how political institutions mediate bond market reactions to severe economic crisis, based on U.S. states’ experience of the 2008 credit market seizure. Following severe fiscal shocks, political institutions assume greater importance in assessing risk characteristics of state bonds. The bond market reacts most strongly to two factors: public sector union strength in a state and the proportion of Democrats in the state legislature. We suggest that the identity of political institutions becomes increasingly important, during periods of economic crises, when credit markets might expect that political systems can no longer delay stabilisations and must deliver policy.
| Original language | English |
|---|---|
| Pages (from-to) | 77-89 |
| Number of pages | 13 |
| Journal | Journal of Economic Policy Reform |
| Volume | 19 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2016 Jan 2 |
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All Science Journal Classification (ASJC) codes
- Business and International Management
- Economics, Econometrics and Finance(all)
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The impact of political institutions on U.S. state bond yields during crises : evidence from the 2008 credit market seizure. / Hong, Sounman; Nadler, Daniel.
In: Journal of Economic Policy Reform, Vol. 19, No. 1, 02.01.2016, p. 77-89.Research output: Contribution to journal › Article
TY - JOUR
T1 - The impact of political institutions on U.S. state bond yields during crises
T2 - evidence from the 2008 credit market seizure
AU - Hong, Sounman
AU - Nadler, Daniel
PY - 2016/1/2
Y1 - 2016/1/2
N2 - This study examines how political institutions mediate bond market reactions to severe economic crisis, based on U.S. states’ experience of the 2008 credit market seizure. Following severe fiscal shocks, political institutions assume greater importance in assessing risk characteristics of state bonds. The bond market reacts most strongly to two factors: public sector union strength in a state and the proportion of Democrats in the state legislature. We suggest that the identity of political institutions becomes increasingly important, during periods of economic crises, when credit markets might expect that political systems can no longer delay stabilisations and must deliver policy.
AB - This study examines how political institutions mediate bond market reactions to severe economic crisis, based on U.S. states’ experience of the 2008 credit market seizure. Following severe fiscal shocks, political institutions assume greater importance in assessing risk characteristics of state bonds. The bond market reacts most strongly to two factors: public sector union strength in a state and the proportion of Democrats in the state legislature. We suggest that the identity of political institutions becomes increasingly important, during periods of economic crises, when credit markets might expect that political systems can no longer delay stabilisations and must deliver policy.
UR - http://www.scopus.com/inward/record.url?scp=84949529176&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84949529176&partnerID=8YFLogxK
U2 - 10.1080/17487870.2015.1077707
DO - 10.1080/17487870.2015.1077707
M3 - Article
AN - SCOPUS:84949529176
VL - 19
SP - 77
EP - 89
JO - Journal of Economic Policy Reform
JF - Journal of Economic Policy Reform
SN - 1748-7870
IS - 1
ER -