Resolving Debt Overhang: Political Constraints in the Aftermath of Financial Crises

Atif Mian, Amir Sufi and Francesco Trebbi

American Economic Journal: Macroeconomics, 2014, vol. 6, issue 2, 1-28

Abstract: Countries become more politically polarized and fractionalized following financial crises, reducing the likelihood of major financial reforms precisely when they might have especially large benefits. The evidence from a large sample of countries provides strong support for the hypotheses that following a financial crisis, voters become more ideologically extreme and ruling coalitions become weaker, independently of whether they were initially in power. The evidence that increased polarization and weaker governments reduce the chances of financial reform and that financial crises lead to legislative gridlock and anemic reform is less clear-cut. The US debt overhang resolution is discussed as an illustration.

JEL-codes: D72 E32 E44 G01 H63 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/mac.6.2.1
References: Add references at CitEc
Citations: View citations in EconPapers (134)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mac.6.2.1 (application/pdf)
http://www.aeaweb.org/aej/mac/app/0602/2012-0022_app.pdf (application/pdf)
http://www.aeaweb.org/aej/mac/data/0602/2012-0022_data.zip (application/zip)
http://www.aeaweb.org/aej/mac/ds/0602/2012-0022_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Resolving Debt Overhang: Political Constraints in the Aftermath of Financial Crises (2012)
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:aea:aejmac:v:6:y:2014:i:2:p:1-28

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().