Do financial markets reward government spending efficiency?

Arbeitspapier

We link governments' spending efficiency scores, to sovereign debt assessments made by financial markets', more specifically by three rating agencies (Standard & Poors, Moody's and Fitch). Public efficiency scores are computed via data envelopment analysis. Then, we rely notably on ordered response models to estimate the response of sovereign ratings to changes in efficiency scores. Covering 34 OECD countries over the period 2007-2018, we find that increased public spending efficiency is rewarded by financial markets via higher sovereign debt ratings. In addition, higher inflation and government indebtedness lead to sovereign rating downgrades, while higher foreign reserves contribute to rating upgrades.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: EconPol Working Paper ; No. 62

Classification and Topics

• Classification: Wirtschaft ; Semiparametric and Nonparametric Methods: General ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Financial Markets and the Macroeconomy ; International Financial Markets ; Structure, Scope, and Performance of Government ; National Government Expenditures and Related Policies: General
• Subject: government spending efficiency ; DEA ; panel analysis ; ordered probit (logit) ; sovereign ratings ; rating agencies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Afonso, António ; Jalles, João Tovar ; Venâncio, Ana
• Event: Veröffentlichung
• (who): ifo Institute - Leibniz Institute for Economic Research at the University of Munich
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/233807
• Last update: 10.03.2025, 11:42 AM CET