The Role of Politics in Financial Crises in Emerging Markets

Paola Montero Ledezma de Hagerf

No 118, Investigación & Desarrollo from Universidad Privada Boliviana

Abstract: In this paper, we embed the key political mechanisms, specific to developing countries, into a political-economic model of financial crises. In this setup, financial market failures allow opportune government intervention to restore optimal allocation of resources. However, bad public policies could provoke financial crises. We find that the political interests and individuals’ 1-dimensional heterogeneity, in terms of productivity, lead to different preferred policies between the median-productive and mean-productive economic agents, which might in turn induce to bad public intervention. Therefore, the larger the difference between these two reference individuals, the higher the probability of financial crises. We also discuss some features of the financial crises in Argentina (2001-2002) and its similarities with our model.

Keywords: Financial Crises; Political Economy; Emerging Markets; Government Intervention. (search for similar items in EconPapers)
JEL-codes: B23 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www1.upb.edu/RePEc/iad/wpaper/0118.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iad:wpaper:0118

Access Statistics for this paper

More papers in Investigación & Desarrollo from Universidad Privada Boliviana Contact information at EDIRC.
Bibliographic data for series maintained by Ricardo Nogales C. ().