Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322542 
Year of Publication: 
2025
Series/Report no.: 
Bruegel Working Paper No. 01/2025
Publisher: 
Bruegel, Brussels
Abstract: 
Political risk is a significant determinant of bond yields and economic growth in both developed and emerging markets and we develop a debt sustainability analysis model with both channels using a country ratings proxy of political risk. Political risk also affects a sovereign's willingness to pay and it can render debt unsustainable, triggered by changes in the rating level, volatility or both. Conversely, sustainability can be restored through reforms that can be as effective as large-scale quantitative easing programmes. The political effects on debt are especially large for high-debt countries during periods of high interest rates, and have an impact on debt management through the choice of optimal financing maturities.
Subjects: 
Debt management
debt sustainability analysis
government stability
political risk
structural reforms
public debt
sustainability
eu governance
JEL: 
E52
E62
F30
F34
G15
G18
H62
H63
H68
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.