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Sovereign Credit Ratings, Transparency and Political Survival

Date
-
Speaker
Peter Rosendorff, Professor of Politics, New York University
Location
Graham Stuart Lounge - Encina Hall West, Room 400
Abstract

Retrospective voting models suggest that citizens sanction politicians for economic mismanagement. We show that citizens use sovereign credit ratings as a signal of a leader’s competence; they punish incumbents when ratings decline and reward them when ratings improve. Moreover, citizens’ reliance on ratings agencies’ signals as information shortcuts is heightened in poor information environments – citizens respond more to ratings signals when economic performance is less transparent. Citizens are also more likely to penalize incumbent governments for poor economic performance when a ratings downgrade occurs during a period of monetary crisis. We provide evidence for these hypotheses from two distinct empirical strategies: the first employs an “unexpected event during survey design” (UESD) to identify a causal effect of ratings downgrades on citizens who happen to be surveyed immediately following a downgrade, as compared to just before. We supplement these findings with a broader quarterly dataset on executive approval for over 70 countries over 25 years. In both analyses, we identify a robust decline in support for incumbents following downgrades. This decline is more pronounced in settings with low economic policy transparency, and during inflation or exchange rate crises.

Biography

Peter Rosendorff is a Professor of Politics at New York University with an affiliate appointment at NYU-Abu Dhabi, and Director of Research at the Princeton Sovereign Finance Lab.

He is the previous editor of the interdisciplinary journal, Economics and Politics, and currently a member of the editorial team at International Organization.  He sits on the editorial boards  of American Journal of Political Science,  International Organization, and previously at Journal of Politics and International Interactions. He is a founder of the the Global Research in International Political Economy Webinar, and he runs the NYU IR Workshop.  Prior to joining NYU,  he was Director of the Center for International Studies and Associate Professor of International Relations at the University of Southern California.   He has held grants from the National Science Foundation, and the Japan Foundation, among others. He has held visiting appointments at Princeton, UCLA and Georgetown. 

His research interests include the political economy of terrorism, bilateral trade and investment, sovereign debt, international organizations, and the anti-globalization backlash.  He is the author, together with James R. Hollyer and James R. Vreeland of Information, Democracy and Autocracy: Economic Transparency and Political (In)Stability, Cambridge University Press (2018), where they explore the causes and consequences of information flows on democratic stability and autocratic instability.

He has presented his work at conferences and workshops around the world, and offered keynote lectures at the World Trade Organization in Geneva, the Instituto Nacional de Transparencia, Acceso a la Información y Protección de Datos Personales in Mexico City, The Alexander Hamilton Center at NYU in New York, Economic Research Southern Africa in Soweto and the Political Economy of Reforms Workshop at Mannheim University. His research and commentary has been featured in The Washington PostThe EconomistThe Boston GlobeThe Atlantic and The Los Angeles Times, among others.