Sovereign Spreads and the Political Leaning of Nations

Johnny Cotoc, Alok Johri and César Sosa‐Padilla

International Economic Review, 2025, vol. 66, issue 2, 687-709

Abstract: Nations with a higher propensity to elect left governments tend to pay higher and more volatile sovereign spreads. We build a sovereign default model with elections between left and right policymakers. Reelection probabilities increase with government spending, with the left having a small advantage (consistent with the data). We use variation in “election efficiency” to create model economies that elect the left more (left leaning) or less frequently (right leaning) in equilibrium. The left‐leaning economy has a higher reluctance for fiscal austerity than the right‐leaning economy, chooses higher government spending, and faces higher spreads, resulting in lower welfare.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/iere.12767

Related works:
Working Paper: Sovereign Spreads and the Political Leaning of Nations (2023)
Working Paper: Sovereign Spreads and the Political Leaning of Nations (2023)
Working Paper: Sovereign Spreads and the Political Leaning of Nations (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:iecrev:v:66:y:2025:i:2:p:687-709

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().