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Do financial markets affect election outcomes? Evidence from municipal bond ratings



Publishing details

Social Sciences Research Network

Authors / Editors

Cunha I;Ferreira M A;Silva R

Publication Year



We show that financial markets can affect political outcomes. Specifically, we study the effects of municipal bond ratings on gubernatorial and mayoral elections in the United States. We find that incumbent politicians in upgraded municipalities experienced an increase in their vote shares. Our evidence is consistent with ratings affecting elections directly by improving voter perceptions of the quality of incumbents, and indirectly by improving local economic conditions. We identify these effects by exploiting exogenous variation in municipal bond ratings due to Moody's recalibration of its scale in 2010.


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


Social Sciences Research Network

Available on ECCH


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