This paper 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...

To what extent do bond market reactions to an unexpected deficit shock depend on state-specific politics? To answer this question, we calculate German state bond spreads over government benchmark paper using information from Datastream for the period 2006-2010. We test for a variety of...

Political-institutional factors — such as the political composition of state legislatures, and interstate variations in public sector labor environments, such as union strength, and collective bargaining rights — can explain a significant proportion of interstate variation in bankruptcy...