عوامل سیاسی گسترش بازدهی اوراق قرضه

This paper analyzes the political determinants of sovereign bond yield spreads using data for 27 emerging markets in the period 1996 to 2009. I find strong evidence that countries with parliamentary systems (as opposed to presidential regimes) and a low quality of governance face higher sovereign yield spreads, while the degree of democracy and elections play no significant role. A higher degree of political stability and the power to implement austerity measures significantly reduce sovereign yield spreads particularly in autocratic regimes, while no significant effect is detected for democratic countries. Overall, political determinants have a more pronounced impact on sovereign bond yield spreads in autocratic and closed regimes than in democratic and open countries.

Governments can choose to default on their debt. Political institutions, the behavior of policymakers, and the quality of governance therefore seem to be natural determinants of the risk of sovereign default. Since sovereign debt defaults are associated with losses for investors, it is crucial for them to estimate sovereign default risk and to include this risk into the prices of sovereign bonds. This paper studies how various political aspects determine sovereign bond yield spreads in emerging markets. Several interesting papers have studied the determinants of sovereign default risk, focusing either on actual sovereign default episodes (Manasse and Roubini, 2009; Saiegh, 2009; van Rijckeghem and Weder, 2009; Kohlscheen, 2010; Reinhart and Rogoff, 2011a, 2011b), or on sovereign bond yield spreads for emerging markets (Edwards, 1986; Cantor and Packer, 1996; Mauro et al., 2002; Block and Vaaler, 2004; Baldacci et al., 2008; Dailami et al., 2008; Hilscher and Nosbusch, 2010; Faria et al., 2011; Laurin, 2012) or eurozone countries (Codogno, Favero, and Missale, 2003; Gómez-Puig, 2008, 2009; Beber, Brandt, and Kavajecz, 2009; Schuknecht, von Hagen, and Wolswijk, 2009; von Hagen, Schuknecht, and Wolswijk, 2011; Bernoth, von Hagen, and Schuknecht, 2012; Bernoth and Erdogan, 2012; Eichler and Maltritz, 2012; Maltritz, 2012; Georgoutsos and Migiakis, 2012; Gómez-Puig, 2012). The list of variables which these studies identify as important drivers of sovereign default risk includes, for example, high levels of public debt, poor macroeconomic fundamentals (such as slow economic growth), shortages of foreign exchange reserves, and global risk factors. Given the relevance of this topic, few papers have focused on the political aspects of sovereign default risk.1Manasse and Roubini (2009), van Rijckeghem and Weder (2009), Saiegh (2009), and Kohlscheen (2010) use actual sovereign default episodes in order to study the impact the political system has on the occurrence of a sovereign debt crisis. van Rijckeghem and Weder (2009) find that, in democracies, the presence of sufficient checks and balances and a parliamentary system reduce the risk of external debt defaults if the economic fundamentals are sufficiently strong. In non-democratic systems, the risk of defaults on domestic debt is low if the political regime is characterized by a high degree of stability, low polarization, or long tenure. Kohlscheen (2010) finds that in parliamentary democracies, where the government needs the support of the legislature to stay in office, the government is less likely to default on external debt than in presidential democracies. What is more, he finds that sovereign debt defaults are less probable for multi-party governments, lower turnover of the executive, effective checks and balances, and at the end of presidential office terms. Saiegh (2009) obtains the result that multi-party governments are less likely to default on their debt than single-party governments. Manasse and Roubini (2009) provide evidence of a political business cycle, finding that the risk of debt defaults rises prior to presidential elections, particularly if elections coincide with large amounts of short-term debt and relatively rigid exchange rate regimes. The impact of politics on sovereign bond yield spreads – as a financial market based indicator of sovereign default risk – has been studied by Block and Vaaler (2004). They study the impact of the political business cycle on sovereign yield spreads and ratings. The political business cycle theory predicts that governments will implement expansionary fiscal policies prior to elections (in order to win elections) and to implement contractionary policies afterwards. According to this theory, Block and Vaaler (2004) find that sovereign credit ratings are downgraded in election years and that sovereign bond spreads are higher before elections than after elections. In this paper, I consider a broad set of political aspects that may influence sovereign default risk. While several aspects of the political system have been analyzed for the case of actual sovereign debt default episodes (see Manasse and Roubini, 2009; van Rijckeghem and Weder, 2009; Saiegh, 2009; Kohlscheen, 2010), evidence for financial market-based sovereign bond yield spreads is scarce (with the exception of Block and Vaaler (2004) who focus on the role of elections). Sovereign bond yield spreads offer several advantages compared to the use of sovereign debt default dummies which are used in other studies. The sovereign bond yield spread represents the market’s assessment of the expected loss associated with a possible sovereign default and therefore enables one to study the impact politics has on the continuous level of sovereign default risk, as expected by financial market participants. The meaning of sovereign bond yield spreads is the same for all countries while the classification of actual sovereign debt defaults requires finding suitable criteria for such a debt crisis. Furthermore, sovereign bond yield spreads are forward-looking financial market data and therefore enable one to study investors’ assessment of the impact of different aspects of politics on the risk of possible sovereign defaults in the future. I use annual panel data for 27 emerging markets in the period 1996 to 2009 to study the impact of politics on sovereign default risk. In order to quantify sovereign default risk, I use sovereign bond yield spreads taken from JP Morgan’s Emerging Markets Bond Index. The results suggest that countries with parliamentary systems face higher sovereign yield spreads than countries with presidential regimes. By making the government more autonomous from the support of the parliament, unpopular budget consolidation measures may be more likely implemented, which may lead to lower sovereign bond yield spreads. The level of democracy (as opposed to autocracy) and elections are not found to be significant, suggesting that public control over the chief executive and political business cycles do not play an important role for the determination of sovereign bond yield spreads in emerging markets. A higher degree of political stability and a better feasibility of policy change reduce sovereign bond yield spreads in autocratic regimes, while largely insignificant effects are found for democratic countries. Robust evidence is found that a higher quality of governance reduces sovereign default risk. By increasing the efficiency of the legal system, the administration, and regulatory principles and by increasing the civil rights and political participation of their citizens, the government may improve the effectiveness of budget consolidation measures and, in turn, convince financial markets that a sovereign default will not happen. A general result is that sovereign bond yield spreads appear to be more sensitive to political determinants in autocratic and closed regimes than in democratic and open countries.

This paper studied the political determinants of sovereign bond yield spreads for 27 emerging markets in the period 1996 to 2009. Some conclusions are drawn from this analysis. First, presidential regimes generally face lower sovereign bond yield spreads than parliamentary regimes. By making it harder to unseat the chief executive in a presidential system, the government may be more willing to make unpopular decisions, such as implementing austerity budgets. Presidential systems may therefore be a better choice for emerging markets, particularly in times of sovereign debt crisis. Second, stable and powerful governments are found to be important to reduce sovereign bond yield spreads, particularly in autocratic regimes. Third, improving the quality of governance helps to reduce sovereign bond yield spreads. The efficiency of the legal system, administration, and regulation should be increased. Such improvements in the quality of governance will stimulate economic growth and increase the efficiency of spending cuts and tax increases and may, in turn, convince investors that a sovereign default is unlikely. Fourth, the relevance of political variables for the determination of sovereign bond yield spreads is much higher for autocratic and closed regimes than for democratic and open countries. Thus, democratization of societies and a faster integration of emerging markets into the world economy may reduce the impact of politics on sovereign bond yield spreads.