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The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective
Existing empirical literature on political business cycles focused primarily on developed economies before it began considering a basket of both developed and developing economies. This study seeks to expand the existing literature by pursuing two objectives using Brazil, Russia, India, China and So...
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| Format: | Thesis |
| Language: | English |
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Department of Finance and Tax
2020
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| _version_ | 1867613213640622080 |
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| access_status_str | Open Access |
| author | Kamande, Ian Edmond Kuria |
| author2 | Pamburai, Hamutyinei Harvey |
| author_browse | Kamande, Ian Edmond Kuria Pamburai, Hamutyinei Harvey |
| author_facet | Pamburai, Hamutyinei Harvey Kamande, Ian Edmond Kuria |
| author_sort | Kamande, Ian Edmond Kuria |
| collection | Thesis |
| description | Existing empirical literature on political business cycles focused primarily on developed economies before it began considering a basket of both developed and developing economies. This study seeks to expand the existing literature by pursuing two objectives using Brazil, Russia, India, China and South Africa (BRICS) as locations of the study. The first objective is to examine the presence (lack thereof) of political business cycles in the BRICS trading block for the period 1994 to 2014. The second objective of this study is to examine the effect that political business cycles (if present) have on the sovereign credit ratings that the BRICS countries receive from credit rating agencies. Credit rating agencies make use of a combination of political, social and economic factors to determine the ratings assigned to various countries. The credit ratings assigned to countries by these agencies play an important role to international lenders as they use these ratings to make decisions on the interest rates they charge to different sovereigns. Based on the first objective, the findings from this study show that there is weak evidence of electorally timed interventions in BRICS economies over the period of 1994 to 2014. These findings are inconsistent with the predictions of political business cycle theory which suggests that incumbent politicians take advantage of the information gap between them and voters by implementing economic changes closer to an election year in order to exude competence and to increase their chances of reelection. However, further analysis based on the second objective shows that elections in BRICS countries are not viewed negatively by credit rating agencies. Hence, unlike in other developing countries, the BRICS countries are not likely to be downgraded during or after election years. Consequent to these findings, this study supports the notion that the government’s influence on the fiscal and monetary policy variables across BRICS is not concentrated nor overly exerted around election periods and that the BRICS countries’ institutions are regarded by rating agencies as independent and up to relevant international standards. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/32101 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:32:34.479Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2020 |
| publishDateRange | 2020 |
| publishDateSort | 2020 |
| publisher | Department of Finance and Tax |
| publisherStr | Department of Finance and Tax |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/32101 The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective Kamande, Ian Edmond Kuria Pamburai, Hamutyinei Harvey political business cycles Existing empirical literature on political business cycles focused primarily on developed economies before it began considering a basket of both developed and developing economies. This study seeks to expand the existing literature by pursuing two objectives using Brazil, Russia, India, China and South Africa (BRICS) as locations of the study. The first objective is to examine the presence (lack thereof) of political business cycles in the BRICS trading block for the period 1994 to 2014. The second objective of this study is to examine the effect that political business cycles (if present) have on the sovereign credit ratings that the BRICS countries receive from credit rating agencies. Credit rating agencies make use of a combination of political, social and economic factors to determine the ratings assigned to various countries. The credit ratings assigned to countries by these agencies play an important role to international lenders as they use these ratings to make decisions on the interest rates they charge to different sovereigns. Based on the first objective, the findings from this study show that there is weak evidence of electorally timed interventions in BRICS economies over the period of 1994 to 2014. These findings are inconsistent with the predictions of political business cycle theory which suggests that incumbent politicians take advantage of the information gap between them and voters by implementing economic changes closer to an election year in order to exude competence and to increase their chances of reelection. However, further analysis based on the second objective shows that elections in BRICS countries are not viewed negatively by credit rating agencies. Hence, unlike in other developing countries, the BRICS countries are not likely to be downgraded during or after election years. Consequent to these findings, this study supports the notion that the government’s influence on the fiscal and monetary policy variables across BRICS is not concentrated nor overly exerted around election periods and that the BRICS countries’ institutions are regarded by rating agencies as independent and up to relevant international standards. 2020-07-10T10:06:39Z 2020-07-10T10:06:39Z 2018 2020-07-10T09:54:23Z Master Thesis Masters https://hdl.handle.net/11427/32101 eng application/pdf Department of Finance and Tax Faculty of Commerce |
| spellingShingle | political business cycles Kamande, Ian Edmond Kuria The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective |
| thesis_degree_str | Master's |
| title | The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective |
| title_full | The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective |
| title_fullStr | The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective |
| title_full_unstemmed | The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective |
| title_short | The role of political business cycles (PBCs) and its influence on the credit rating action that countries receive: A BRICS perspective |
| title_sort | role of political business cycles pbcs and its influence on the credit rating action that countries receive a brics perspective |
| topic | political business cycles |
| url | https://hdl.handle.net/11427/32101 |
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