So right it’s wrong?

• Robert Schuman Centre for Advanced Studies
• Department of Political and Social Sciences

Exploring the deterioration of markets’ evaluation of right executives

Political economy literature documents how financial investors are more partial to right executives than left ones. Right cabinets face lower interest rates, less volatile stock prices and exchange rates, and higher credit ratings than left cabinets, even after accounting for differences in fiscal performance. But does this advantage persist if right parties accommodate far-right parties or ideas?

In this seminar, Alison Johnston explores the hypothesis that because far-right populism can introduce political instability, markets’ evaluation of right executives might deteriorate if they enter coalition with far-right parties or adopt their positions. She will elaborate on her findings showing that right executives enjoy significantly lower spreads than their left-wing counterparts, but this advantage disappears if they rule in coalition with the far-right or produce overly right-wing manifestos. These findings highlight that right parties may encounter market rebuke, and tangible borrowing costs, if they accommodate far-right populism.