@TechReport{dp-573,
  author        = {Eichler, Stefan and Plaga, Timo},
  astring       = {Stefan Eichler and Timo Plaga},
  title         = {The Political Determinants of Government Bond Holdings},
  month         = {March},
  year          = {2016},
  pages         = {37},
  number        = {573},
  language      = {en},
  keywords      = {Government bond portfolio, Political factors, Treasury
                  International Capital data, PPML},
  jelclass      = {G11; G15; G18; H63; H11},
  abstract      = {This paper analyzes the link between political factors and
                  sovereign bond holdings of US investors in 60 countries
                  over the 2003-2013 period. We find that, in general, US
                  investors hold more bonds in countries with few political
                  constraints on the government. Moreover, US investors
                  respond to increased uncertainty around major elections by
                  reducing government bond holdings. These effects are
                  particularly significant in democratic regimes and
                  countries with sound institutions, which enable effective
                  implementation of fiscal consolidation measures or economic
                  reforms. In countries characterized by high current default
                  risk or a sovereign default history, US investors show a
                  tendency towards favoring higher political constraints as
                  this makes sovereign default more difficult for the
                  government. Political instability, characterized by the
                  fluctuation in political veto players, reduces US
                  investment in government bonds. This effect is more
                  pronounced in countries with low sovereign solvency. }
}