Friends for the Benefits: The Effects of Political Ties on Sovereign Borrowing Conditions

28 Pages Posted: 23 Jul 2019 Last revised: 24 Jul 2019

See all articles by Gene Ambrocio

Gene Ambrocio

Bank of Finland

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Date Written: July 22, 2019

Abstract

Do closer political ties with a global superpower improve sovereign borrowing conditions? We use data on voting at the United Nations General Assembly along with foreign aid flows to construct an index of political ties and find evidence that suggests closer political ties leads to both better sovereign credit ratings and lower yields on sovereign bonds. We use heads-of-state official visits and coalition forces troop contributions as exogenous instruments to further strengthen the findings.

JEL Classification: F50, F35, H63, G24

Suggested Citation

Ambrocio, Gene and Hasan, Iftekhar, Friends for the Benefits: The Effects of Political Ties on Sovereign Borrowing Conditions (July 22, 2019). Bank of Finland Research Discussion Paper No. 13/2019, Available at SSRN: https://ssrn.com/abstract=3424563

Gene Ambrocio (Contact Author)

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

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