Trust Us to Repay: Social Trust, Long-Term Interest Rates and Sovereign Credit Ratings

No 1039, Working Paper Series from Research Institute of Industrial Economics

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.

Keywords: Trust; Credit ratings; Interest rates; Economic reforms (search for similar items in EconPapers)
JEL-codes: A13 G12 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-09-03
New Economics Papers: this item is included in nep-cba and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ifn.se/wfiles/wp/wp1039.pdf (application/pdf)

Related works:
Journal Article: Trust Us to Repay: Social Trust, Long‐Term Interest Rates, and Sovereign Credit Ratings (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1039

Access Statistics for this paper

More papers in Working Paper Series from Research Institute of Industrial Economics Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Gustafsson ().