Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/109107
Authors: 
Bergh, Andreas
Bjørnskov, Christian
Year of Publication: 
2014
Series/Report no.: 
IFN Working Paper 1039
Abstract: 
This paper asks whether the sensitivity of market long-term interest rates and credit ratings is associated with cross-country differences in informal institutions, measured by social trust. We note a number of theoretical mechanisms that could imply that similar objective problems are more likely to be effectively dealt with in higher-trust societies. A set of panel estimates across middle and high-income countries reveal that interest rates and ratings are substantially more sensitive to inflation and growth problems in low-trust countries. This finding sheds light on the differential market reactions to economic problems in seemingly comparable countries.
Subjects: 
Trust
Credit ratings
Interest rates
Economic reforms
JEL: 
A13
G12
Document Type: 
Working Paper

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