The Effects of Political Stability in Local Currency Bond Markets

Authors

  • Kristin A. Van Gaasbeck California State University, Sacramento
  • Taylor Marchelle California State University, Sacramento

DOI:

https://doi.org/10.33423/jabe.v22i4.2913

Keywords:

Business, Economics, sovereign bond yield, political factors, emerging markets, Local Currency

Abstract

This study analyzes the effects of political stability, institutional quality, and event shocks on 1-year, 10- year, and 30-year local currency bond yields. The data were collected from Bloomberg, IMF, World Bank, and OECD and cover 15 emerging market countries on a monthly frequency from January 2007 to February 2017. This study found that higher degrees of political stability and quality lead lower yields and lower default risk. Political event shocks such as party-changing elections lead to increased yields and default risk, while politically-motivated acts of violence affected the slope of yield curve.

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Published

2020-08-04

How to Cite

Van Gaasbeck, K. A., & Marchelle, T. (2020). The Effects of Political Stability in Local Currency Bond Markets. Journal of Applied Business and Economics, 22(4). https://doi.org/10.33423/jabe.v22i4.2913

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Section

Articles