International political risk and government bond pricing

Tao Huang, Fei Wu, Jing Yu, Bohui Zhang

Research output: Contribution to journalArticlepeer-review

45 Citations (Scopus)


This paper investigates the impact of international political risk on government bond yields in 34 debtor countries using a comprehensive database of 109 international political crises from 1988 through 2007. After employing the total number of international political crises as a proxy for political risk and controlling for country-specific economic conditions, we establish a positive and significant link between international political risk and government bond yields. This is consistent with global bond investors demanding higher returns at times of high political uncertainty. In addition, we show that international political risk has a reduced adverse effect on bond prices when the debtor country has a stable political system and strong investor protection.
Original languageEnglish
Pages (from-to)393-405
Number of pages13
JournalJournal of Banking and Finance
Publication statusPublished - Jun 2015
Externally publishedYes


  • Political risk
  • Government bond
  • Investor protection


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