This paper analyses the factors that seem to play an important role in
determining the cost of sovereign debt. Specifically, we evaluate to what
extent transparency, corruption level, citizens’ trust on politicians and
credit ratings affect interest rates. For that purpose, we create a
transparency index matching the 2007 OECD/World Bank Budgeting
Database items with the OECD Best Practices for Budget Transparency
sections. We also check our assumptions with the International Budget
Partnership’s Open Budget Index and with a non-linear transformation of
our index. Furthermore, we take several control variables for a sample of
103 countries in the year 2008. Our results show that better fiscal
transparency, political trust and credit ratings is connected with a lower
cost of sovereign debt . Finally, as expected, higher corruption, budget
deficit, current account deficit and unemployment make sovereign interest
rates increase.