Political Instability and Debt Maturity.
Political instability has been blamed for many poor macroeconomic outcomes, such as high inflation, unemployment, and low growth. The author proposes yet another negative consequence of political instability: political instability and polarization generate inflation uncertainty which causes the term structure to steepen, consequently political instability and polarization reduce the average maturity and increase the expected cost of debt. A model is derived which illustrates these relationships. Political instability and polarization are then proxied and shown to be inversely related to debt maturity for a sample of OECD countries. Copyright 1997 by Oxford University Press.
Year of publication: |
1997
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Authors: | Miller, Victoria |
Published in: |
Economic Inquiry. - Western Economic Association International - WEAI. - Vol. 35.1997, 1, p. 12-27
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Publisher: |
Western Economic Association International - WEAI |
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