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Can credit rating agencies affect election outcomes?



Publishing details

Social Sciences Research Network

Authors / Editors

Cunha I;Ferreira M A;Silva R

Publication Year



We show that credit rating agencies can have a significant effect on election outcomes. Specifically, we find that incumbent politicians in upgraded municipalities experience an increase in their vote shares and likelihood of winning. This incumbent effect is due to an expansion of local governments’ debt capacity that allows them to increase spending. The effects are stronger among Democratic incumbents. We identify these effects by exploiting the exogenous variation in municipal bond ratings due to Moody’s recalibration of its scale in 2010. The effects are consistent with good economic conditions and increases in wealth making voters more lenient toward the incumbent due to attribution errors and reduction in information asymmetry.


Elections; Credit ratings; Financial constraints; Municipal bonds; Government spending; Economic conditions


Social Sciences Research Network

Available on ECCH


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