Skip to main content Accessibility help
Hostname: page-component-55597f9d44-t4qhp Total loading time: 0.425 Render date: 2022-08-17T06:34:05.066Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "useRatesEcommerce": false, "useNewApi": true } hasContentIssue true

Sovereign credit and political survival in democracies

Published online by Cambridge University Press:  04 March 2018


Models of distributive politics often assume that fixed budgets constrain the efforts of incumbents to retain power. Yet, significant variation exists in politicians' abilities to push distributive costs forward by funding current fiscal policy through sovereign borrowing. This article theorizes how and when variation in sovereign credit access influences the central goal of democratic incumbents: political survival. Credit allows incumbents to reward supporters without immediately extracting domestic revenue. Excessive borrowing, however, risks higher interest rates or possible market exclusion. Considering sovereign borrowing's benefits and costs, we argue that the marginal effect of credit access on political survival is greatest for those incumbents that require other parties to implement fiscal policy. An analysis of incumbent party tenure in seventy-one democracies from 1977–2007 demonstrates that affordable sovereign finance is associated with longer tenures under divided government but has no significant effect on survival under unified governments.

Research Article
Copyright © V.K. Aggarwal 2018 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Abbas, S. M. Ali, Belhocine, Nazim, El-Ganainy, Asmaa, and Horton, Mark. 2011. “Historical Dataset on Debt.IMF Economic Review 59 (November): 717–42.Google Scholar
Alesina, Alberto and Drazen, Allan. 1991. “Why are Stabilizations Delayed?American Economic Review 82 (4): 1170–88.Google Scholar
Alt, James E. and Lassen, David Dreyer. 2006. “Transparency, Political Polarization, and Political Budget Cycles in OECD Countries.” American Journal of Political Science 50 (3): 530–50.CrossRefGoogle Scholar
Alt, James E. and Lowery, Robert C.. 1994. “Divided Government, Fiscal Institutions, and Budget Deficits: Evidence from teh States.” American Political Science Review 88 (4): 811–28.CrossRefGoogle Scholar
Bäck, Hanna and Lindvall, Johannes. 2015. “Commitment Problems in Coalitions: A New Look at the Fiscal Policies of Multi-Party Governments.” Political Science Research and Methods 3 (1): 5372.CrossRefGoogle Scholar
Banzhaf, H. Spencer and Oates, Wallace E.. 2013. “On Fiscal Illusion and Ricardian Equivalence in Local Public Finance.” National Tax Journal 66 (3): 511–40.CrossRefGoogle Scholar
Barro, Robert. 1979. “On the Determination of the Public Debt.” Journal of Political Economy 87 (5): 940–71.CrossRefGoogle Scholar
Bawn, Kathleen and Rosenbluth, Frances. 2006. “Short versus Long Coalitions: Electoral Accountability and the Size of the Public Sector.” American Journal of Political Science 50 (2): 251–65.CrossRefGoogle Scholar
Beaulieu, Emily, Cox, Gary W., and Saiegh, Sebastian. 2012. “Sovereign Debt and Regime Type:Reconsidering the Democratic Advantage.” International Organization 66 (4): 709–38.CrossRefGoogle Scholar
Beck, Thorsten, Clarke, George, Groff, Alberto, Keefer, Philip, and Walsh, Patrick. 2001. “New Tools in Comparative Political Economy: The Database of Political Institutions.” World Bank Economic Review 15 (1): 165–76.CrossRefGoogle Scholar
Bernanke, Ben. 1990. “On the Predictive Power of Interest Rates and Interest Rate Spreads.” New England Economic Review November/December: 5168.Google Scholar
Biglaiser, Glen and Staats, Joseph L.. 2012. “Finding the Democratic Advantage” in Sovereign Bond Ratings: The Importance of Strong Courts, Property Rights Protection and the Rule of Law.” International Organization 66 (3): 515–35.CrossRefGoogle Scholar
Block, Steven A. and Vaaler, Paul M.. 2004. “The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries.” Journal of International Money and Finance 23: 917–46.CrossRefGoogle Scholar
Box-Steffensmeier, Janet M. and Jones, Bradford S.. 2004. Event History Modeling: A guide for social scientists. Cambridge, United Kingdom: Cambridge University Press.CrossRefGoogle Scholar
Breen, Michael and McMenamin, Iain. 2013. “Political Institutions, Credible Commitments, and Sovereign Debt in Advanced Economies.” International Studies Quarterly 57 (4): 842–54.CrossRefGoogle Scholar
Brooks, Robert, Faff, Robert W., Hillier, David, and Hillier, Joseph. 2004. “The national market impact of sovereign rating changes.” Journal of Banking & Finance 28 (1): 233–50.CrossRefGoogle Scholar
Brooks, Sarah, Cunha, Raphael, and Mosley, Layna. 2015. “Categories, Creditworthiness, and Contagion: How Investors’ Shortcuts Affect Sovereign Debt Markets.” International Studies Quarterly 59 (3): 587601.CrossRefGoogle Scholar
Buchanan, James M. 1976. “Barro on the Ricardian Equivalence Theorem.” Journal of Political Economy 84 (2): 337–42.CrossRefGoogle Scholar
Campello, Daniela and Zucco, Cesar Jr. 2016. “Presidential Success and the World Economy.” The Journal of Politics 78 (2): 589602.CrossRefGoogle Scholar
Cantor, Richard and Packer, Frank. 1996. “Determinants and Impact of Sovereign Credit Ratings.” Economic Policy Review October: 3753.Google Scholar
Cheibub, Jose Antonio, Gandi, Jennifer, and Vreeland, James Raymond. 2010. “Democracy and Dictatorship Revisited.” Public Choice 143: 67101.CrossRefGoogle Scholar
Clay, K. Chad and DiGiuseppe, Matthew. 2017. “The Physical Consequences of Fiscal Flexibility: Sovereign Credit and Physical Integrity Rights.” British Journal of Political Science 47 (4): 783807.CrossRefGoogle Scholar
Crespo-Tenorio, Adriana, Jensen, Nathan M., and Rosas, Guillermo. 2014. “Political Liabilities: Surviving Banking Crises.” Comparative Political Studies 47 (7): 1047–74.CrossRefGoogle Scholar
Curtis, K. Amber, Jupille, Joseph, and Leblang, David. 2015. “Iceland on the Rocks: The Mass Political Economy of Sovereign Debt Resettlement.” International Organization forthcoming.Google Scholar
DiGiuseppe, Matthew and Shea, Patrick. 2015. “Sovereign Credit and the Fate of Leaders: Reassessing the ‘Democratic Advantage.’” International Studies Quarterly 59 (3): 557–70.CrossRefGoogle Scholar
DiGiuseppe, Matthew and Shea, Patrick. 2016. “Borrowed Time: Sovereign Finance, Regime Type, and Leader Survival.” Economics & Politics 28 (3): 342–67.CrossRefGoogle Scholar
DiGiuseppe, Matthew R, Barry, Colin M., and Frank, Richard W.. 2012. “Good for the money: International finance, state capacity, and internal armed conflict.” Journal of Peace Research 49 (3): 391405.CrossRefGoogle Scholar
Duch, Raymond M. and Stevenson, Randolph. 2008. The Economic Vote: How Political and Economic Institutions Condition Election Results. Cambridge, United Kingdom: Cambridge University Press.CrossRefGoogle Scholar
Elgie, Robert and McMenamin, Iain. 2008. “Political fragmentation, fiscal deficits and political institutionalisation.” Public Choice 136 (3): 255–67.CrossRefGoogle Scholar
Eslava, Marcela. 2011. “The Political Economy of Fiscal Deficits: A Survey.” Journal of Economic Surveys 25 (4): 645–73.CrossRefGoogle Scholar
Franzese, Robert J. 2002. Macroeconomic Policies of Developed Democracies. Ann Arbour, MI: University of Michigan Press.CrossRefGoogle Scholar
Gleditsch, Kristian S. 2002. “Expanded Trade and GDP Data.” Journal of Conflict Resolution 46 (5).CrossRefGoogle Scholar
Gray, Julia. 2013. The Company States Keep: International Economic Organization and Sovereign Risk in Emerging Markets. Cambridge, United Kingdom: Cambridge University Press.CrossRefGoogle Scholar
Hallerberg, Mark. 2010. “Empirical Applicatoins of Veto Player Analysis and Institutional Effectiveness,” In Reform Processess and Policy Change. New York: Springer, 2142.Google Scholar
Hallerberg, Mark and Marier, Patrik. 2004. “Executive Authority, the Personal Vote, and Budget Discipline in Latin American and Caribbean Countries.” American Journal of Political Science 48 (3): 571–87.CrossRefGoogle Scholar
Hibbs, Douglas A. Jr 2000. “Bread and peace voting in US presidential elections.” Public Choice 104 (1–2): 149–80.CrossRefGoogle Scholar
Hollyer, James R., Rosendorff, Peter, and Vreeland, James Raymond. 2014. “Measuring Transparency.” Political Analysis 22 (4): 413–34.CrossRefGoogle Scholar
Jacobs, Alan M. and Matthew, J. Scott. 2012. “Why Do Citizens Discount the Future? Public Opinion and the Timing of Policy Consequences.” British Journal of Political Science 42 (4): 903–35.CrossRefGoogle Scholar
LeDuc, Lawrence and Pammett, Jon H.. 2013. “The Fate of Governing Parties in Times of Economic Crisis.” Electoral Studies 32 (3): 494–99.CrossRefGoogle Scholar
Lewis-Beck, Michael S. and Paldam, Martin. 2000. “Economic voting: an introduction.” Electoral Studies 19 (2): 113–21.CrossRefGoogle Scholar
Longstaff, Francis A., Pan, Jun, Pedersen, Lasse H., and Singleton, Kenneth J.. 2011. “How Sovereign Is Sovereign Credit Risk?American Economic Journal: Macroeconomics 3 (2): 75103.Google Scholar
Martin, Lanny W. and Vanberg, Georg. 2013. “Multiparty Government, Fiscal Institutions, and Public Spending.” The Journal of Politics 75 (04): 953–67.CrossRefGoogle Scholar
Mattes, Michaela, Leeds, Brett Ashley, and Carroll, Royce. 2015. “Leadership Turnover and Foreign Policy Change: Societal Interests, Domestic Institutions, and Voting in the United Nations.” International Studies Quarterly 59 (2): 280–90.CrossRefGoogle Scholar
McGillivray, Fiona and Smith, Alastair. 2008. Punishing the Prince: A Theory of Interstate Relations, Political Institutions, and Leader Change. Princeton, NJ: Princeton University Press.Google Scholar
Morrison, Kevin M. 2009. “Oil, Nontax Revenue, and the Redistributional Foundations of Regime Stability.” International Organization 63 (Winter): 107–38.CrossRefGoogle Scholar
Nadeau, Richard, Niemi, Richard G., and Yoshinaka, Antoine. 2002. “A cross-national analysis of economic voting: taking account of the political context across time and nations.” Electoral Studies 21 (3): 403–23.CrossRefGoogle Scholar
Nordhaus, William D. 1975. “The Political Business Cycle.” Review of Economic Studies 42 (2): 169–90.CrossRefGoogle Scholar
North, Douglass C. and Weingast, Barry R.. 1989. “Constitutions and Commitment: The Evolution of Institutional Governing Public Choice in Seventeenth-Century England.” The Journal of Economic History 49 (4): 803–32.CrossRefGoogle Scholar
Oatley, Thomas. 2011. “The Reductionist Gamble: Open Economy Politics in the Global Economy.” International Organization 65 (2): 311–41.CrossRefGoogle Scholar
Persson, Torsten, Roland, Gerard, and Tabellini, Guido. 2007. “Electoral rules and government spending in parliamentary democracies.” Quarterly Journal of Political Science 2 (2): 155–88.CrossRefGoogle Scholar
Powell, G. Bingham Jr. and Whitten, Guy D.. 1993. “A cross-national analysis of economic voting: taking account of the political context.” American Journal of Political Science 37 (2): 391414.CrossRefGoogle Scholar
Reinhart, Carmen M. and Rogoff, Kenneth S.. 2008. This Time is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Reinhart, Carmen M. and Rogoff, Kenneth S.. 2011. “From financial crash to debt crisis.” The American Economic Review 101 (5): 1,676706.CrossRefGoogle Scholar
Ricciuti, Roberto and DiLaurea, Davide. 2003. “An Experimental Analysis of Two Departures from Ricardian Equivalence.” Economics Bulletin 8 (11): 111.Google Scholar
Roubini, Nouriel and Sachs, Jeffery E.. 1989. “Political and Economic Determinants of Budget Deficits in the Industrial Democracies.” European Economic Review 33: 903–38.CrossRefGoogle Scholar
Saiegh, Sebastian M. 2009. “Coalition Governments and Sovereign Debt Crises.” Economics & Politics 21 (2): 232–54.CrossRefGoogle Scholar
Schaechter, Andrea, Kinda, Tidiane, Budina, Nina, and Weber, Anke. 2012. “Fiscal Rules in Response to the Crisis: Toward the ‘Next Generation’ Rules, A New Dataset.” IMF Working Paper.Google Scholar
Schultz, Kenneth and Weingast, Barry. 2003. “The Democratic Advantage: Institutional Foundations of Financial Power in International Competition.” International Organization 57 (4): 342.CrossRefGoogle Scholar
Seater, John J. 1993. “Ricardian Equivalence.” Journal of Economic Literature 31 (2): 142–90.Google Scholar
Shea, Patrick E. and Solis, Jonathan A.. 2017. “Leaders, Tenure, and the Politics of Sovereign Credit.” International Interactions. Published online 30 November 2017: Scholar
Stasavage, David. 2011. States of Credit: Size, Power, and the Development of European Polities. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Tsebelis, George. 2002. Veto Players: How Political Institutions Work. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Tsebelis, George and Chang, Eric. 2004. “Veto Players and the Structure of Budgets in Advanced Industrialized Countries.” European Journal of Political Research 43 (3): 449–76.CrossRefGoogle Scholar
Vaaler, Paul M., Schrage, Burkhard N., and Block, Steven A.. 2006. “Elections, Opportunism, Partisanship and Sovereign Ratings in Developing Countries.” Review of Development Economics 10 (1): 154–70.CrossRefGoogle Scholar
Van Rijckeghem, Caroline and Weder, Beatrice. 2009. “Political institutions and debt crises.” Public Choice 138 (3): 387408.CrossRefGoogle Scholar
Velasco, Andres. 2000. “Debts and Deficits with Fragmented Fiscal Policymaking.” Journal of Public Economics 76 (1): 105–25.CrossRefGoogle Scholar
Wagner, Richard E. 1976. “Revenue Structure, Fiscal Illusion, and Budgetary Choice.” Public Choice 25 (1): 4161.CrossRefGoogle Scholar
Weingast, Barry R., Shepsle, Kenneth A., and Johnsen, Christopher. 1981. “The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics.” The Journal of Political Economy 89 (4): 642–64.CrossRefGoogle Scholar
Williams, Laron K. and Whitten, Guy D.. 2015. “Don't Stand So Close to Me: Spatial Contagion Effects and Party Competition.” American Journal of Political Science 59 (2): 309–25.CrossRefGoogle Scholar
Wooldridge, Jeffrey M. 2001. Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press.Google Scholar
Wyplosz, Charles. 2014. “Fiscal Rules: Theoretical Issues and Historical Experiences.” In Fiscal Policy After the Financial Crisis, edited by Alesina, Alberto and Giavazzi, Francesco. Chicago, IL: University of Chicago, 495529.Google Scholar
Supplementary material: PDF

DiGiuseppe and Shea supplementary material


Download DiGiuseppe and Shea supplementary material(PDF)
Cited by

Save article to Kindle

To save this article to your Kindle, first ensure is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the or variations. ‘’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Sovereign credit and political survival in democracies
Available formats

Save article to Dropbox

To save this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about saving content to Dropbox.

Sovereign credit and political survival in democracies
Available formats

Save article to Google Drive

To save this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about saving content to Google Drive.

Sovereign credit and political survival in democracies
Available formats

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *