Working Paper No. 1039

Trust Us to Repay: Social Trust, Long-Term Interest Rates and Sovereign Credit Ratings

Published: September 3, 2014Pages: 34Keywords: Trust; Credit ratings; Interest rates; Economic reformsJEL-codes: A13; G12

Trust Us to Repay: Social Trust, Long-Term Interest Rates and Sovereign Credit Ratings Andreas Bergh and Christian Bjørnskov

This paper asks whether the sensitivity of market long-term interest rates and credit ratings is associated with cross-country differences in informal institutions, measured by social trust. We note a number of theoretical mechanisms that could imply that similar objective problems are more likely to be effectively dealt with in higher-trust societies. A set of panel estimates across middle and high-income countries reveal that interest rates and ratings are substantially more sensitive to inflation and growth problems in low-trust countries. This finding sheds light on the differential market reactions to economic problems in seemingly comparable countries.

Andreas Bergh


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Christian Bjørnskov


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Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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