Coalition-based Governance: Ramifications of Parliamentary Meetings on Asset Prices

Sandip Chakraborty1 (), Avinash Ghalk () and Ram Kumar Kakani ()
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Sandip Chakraborty1: Indian Institute of Management (IIM) Calcutta, Kolkata
Avinash Ghalk: Institute of Management and Technology (IMT), Nagpur
Ram Kumar Kakani: Indian Institute of Management Kozhikode

No 378, Working papers from Indian Institute of Management Kozhikode

Abstract: Connecting the dots in developing nations between the 'political' powers and formal 'economic' performance parameters gains wider importance in periods of 'coalition' era political systems’ based democratic parliamentary governance. We explore the inter-linkages between economic performance in terms of ‘asset prices’ and ‘political powers’ using their vital country-level metrics: stock market index, parliament session, ruling party strength and composition of the ruling coalition. By performing modified EGARCH based analysis on a 39-year data (1979- 2018) across 15-different governments from India, we find interesting conclusions that highlight the ‘coalition effect’ on asset prices. Our results show that these effects tend to lower economic returns, induce a spike in terms of the volatility of asset prices, predicting thereby fallouts in governance coupled with allied political risk ramifications thereof. We explore a few key reasons behind the same to make Westminster parliamentary governed nations more meaningful for the financial world.

Keywords: Asset Price Dynamics; Coalition Politics; EGARCH Analysis; India; Westminster Parliament (search for similar items in EconPapers)
Pages: 3 pages
Date: 2020-04
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