Wall Street and Elections in Latin American Emerging Democracies

57 Pages Posted: 10 Nov 2008 Last revised: 18 Aug 2009

See all articles by Sebastián Nieto Parra

Sebastián Nieto Parra

Organization for Economic Co-Operation and Development (OECD)

Javier Santiso

ESADE Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 2008

Abstract

This paper focuses on the interactions between the political cycle and capital markets in emerging economies, examining the way in which Wall Street strategists react to major Latin American political events, specifically presidential elections. For this purpose we construct a database of all sovereign bond recommendations of the major investment banks active in emerging bond markets from 1997 to 2008. Assessing the impact of presidential elections on investment banks' recommendations, we conclude firstly, that the political cycle is a major determinant variable in explaining the downgrading of sovereign bonds in the three months prior to presidential elections. Secondly, the credibility of future macro (fiscal and monetary) policies announced by presidential candidates during campaigns stands out as an important determinant of investment banks' recommendations. In particular, if candidates are not committed to defend sustainable macroeconomic policies, investment banks' downgrade sovereign debt prior to elections.

Keywords: Emerging Markets, Information, Investment Banks Research, Elections

JEL Classification: D72, G11, G14, G15, G24

Suggested Citation

Nieto Parra, Sebastián and Santiso, Javier, Wall Street and Elections in Latin American Emerging Democracies (October 2008). Available at SSRN: https://ssrn.com/abstract=1298928 or http://dx.doi.org/10.2139/ssrn.1298928

Sebastián Nieto Parra

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris, 75775
France

Javier Santiso (Contact Author)

ESADE Business School ( email )

Mateo Inurria 27
Madrid, 28036
Spain

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