TY - THES A1 - Cordes, Till T1 - The Political Economy of Sovereign Rating Criteria : What Rating Agencies Demand from National Governments N2 - Sovereign rating downgrades have led to strong criticism of the criteria used by the three major rating agencies, Standard & Poor’s, Moody’s, and Fitch. But which criteria do rating agencies actually use for evaluating the creditworthiness of sovereign states? The existing literature points to a few basic macroeconomic factors. This book shows that, in addition, rating agencies take political factors into account, in particular a country’s economic liberalization policies, international economic agreements, and political institutions. The book demonstrates the importance of political factors for sovereign ratings based on a new data set for 145 rated countries, which is the largest sample analyzed in the literature thus far. Methodologically, the study combines panel econometric evidence with a text analysis of a unique database of more than 1,200 rating announcements. In 72 per cent of these rating announcements, rating agencies refer to political factors as a key rating determinant. This book argues that rating agencies have good reason for taking political indicators into account as well. (...) T3 - Dissertations submitted to the Hertie School - 02/2014 KW - Ratingagentur KW - Kreditmarkt KW - Regulierung KW - Wirtschaftspolitik Y1 - 2014 N1 - Shelf mark: 2014D002 + 2014D003 ER - TY - THES A1 - Brumm, Elias Franziskus T1 - Essays on the Political Economy of Crisis and Reform N2 - The severe political and economic repercussions of the "euro crisis" during the last decade have revealed the necessity for an improved understanding of both the determinants of sovereign debt crises and the political economy of structural reforms. This dissertation, which consists of three self-contained papers, contributes to these research areas. In the first paper, we investigate the interaction of fiscal federalism and sovereign default risk. Numerous countries with chronic external debt problems are characterized by inefficient federal fiscal structures. However, the impact of a country's federal design on sovereign default risk has barely been studied in previous work. This paper aims to address this gap. We develop a stylized model of a federation in which regions borrow individually from international lenders while the central government decides whether to default on aggregate sovereign debt. We show that decentralized borrowing leads to higher debt levels, at higher bond yields, an increased default probability and lower welfare compared to a benchmark scenario of centralized borrowing. Moreover, differing regional default costs further increase aggregate welfare losses through distorted regional borrowing incentives. Case studies of Argentina and the euro area illustrate the channels described in the model. The second paper analyzes how domestic distributional incentives influence sovereign default on debt held by foreign creditors. In a simple political economy model, we show that external default can serve as a redistributive policy similar to distortionary income taxation. The channel we derive builds on recent evidence which suggests that the output costs of default are mainly incurred by high-income households, whereas relatively poor ones benefit due to smaller public spending cuts. Although the potentially important role of income heterogeneity among domestic agents has attracted comparatively little attention in previous work, historical evidence is in line with our argument. In the third paper (with Johannes Brumm), we argue that an important determinant of voters' support for economic reform is the strength of family ties. While the "crisis hypothesis" predicts that crises facilitate reform, we show in a political economy model that this relation can break down, and even reverse, when agents take into account the effect of reform on their family members. Applied to southern European countries with strong family ties, the model rationalizes why the extremely high (youth) unemployment following the Great Recession has not led to more substantial labor market reforms. In such countries austerity might block rather than foster additional structural reforms. T3 - Dissertations submitted to the Hertie School - 02/2018 KW - Sovereign debt KW - Fiscal federalism KW - Income inequality KW - Structural reforms KW - Youth unemployment Y1 - 2018 UR - https://nbn-resolving.org/urn:nbn:de:kobv:b1570-opus4-25065 U6 - https://doi.org/10.48462/opus4-2506 N1 - Shelf mark: 2018D001 + 2018D001+1 ER - TY - THES A1 - Cordes, Anne Christine T1 - Fiscal Consolidation Following a Sovereign Default. The Burden of Monetary Union Membership and the Role of the International Monetary Fund N2 - The global financial crisis has reignited the debate about the costs of sovereign default and the drawbacks of monetary union membership. Historically, several members of monetary unions defaulted on their debt and thereafter had to consolidate their finances. However, following a default, do members of a monetary union actually have to rely on fiscal consolidation to a greater extent than do other countries? This dissertation provides the first comprehensive comparison of sovereign defaults in a monetary union. In the period from 1990 to 2010, four monetary union members defaulted on their debt: Antigua and Barbuda, Dominica, Gabon, and Grenada. Their fiscal policy responses following these defaults are compared with those of four similar small middle income countries: Jamaica, Seychelles, Belize, and Suriname. This dissertation analyses the size, type, and timing of fiscal consolidation based on several hundred primary sources, from appropriation acts to budget plans and government speeches. The comparison shows that all countries had to consolidate following a default – irrespective of their membership of a monetary union. The four countries with an independent monetary policy tried to ease the burden of adjustment by devaluing their currencies, lowering refinancing rates, putting pressure on domestic banks, or resorting to direct central bank financing. However, in turn, foreign currency debt increased due to the resulting depreciation of the exchange rate. That is, countries outside of a monetary union have also had to consolidate. However, monetary union members still faced a greater burden of adjustment as they had to cut nominal expenditure to achieve the necessary internal devaluation inside the monetary union and could not let inflation do the work. This dissertation also highlights the central role of the International Monetary Fund (IMF) in explaining the type and timing of fiscal consolidation following a sovereign default. Six of the eight countries turned to the IMF at some point. Once they had signed up to an IMF programme, they consolidated more, especially on the expenditure side. Despite these differences in the type and timing of fiscal consolidation due to monetary union membership and the involvement of the IMF, none of the eight countries could avoid consolidating its finances following the sovereign default. T3 - Dissertations submitted to the Hertie School - 02/2020 Y1 - 2020 UR - https://nbn-resolving.org/urn:nbn:de:kobv:b1570-opus4-35645 U6 - https://doi.org/10.48462/opus4-3564 N1 - Shelf mark: 2020D008 + 2020D008+1 ER -