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Political influences on the costs of banking crises in emerging market economies: testing the U-shaped veto player hypothesis

Apanard Angkinand Prabha and Thomas Willett

Macroeconomics and Finance in Emerging Market Economies, 2008, vol. 1, issue 2, 279-297

Abstract: While there has been considerable research on the consequences of financial crises, there has been little empirical research on the possible effects of the role of domestic political institutions that influence a government's ability to implement crisis management policies. This paper investigates the impact of domestic institutions, characterized by a U-shaped veto player framework, on the output costs of banking crises. The analysis extends MacIntyre's qualitative study (2001) of the relationship between veto players and policy risks in the Asian financial crises. For a large sample of emerging market economies, we find support for McIntyre's hypotheses that both too few and too many veto players are associated with greater costs of banking crises.

Keywords: veto player; output cost; banking crises (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1080/17520840802252878

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Macroeconomics and Finance in Emerging Market Economies is currently edited by Subrata Sarkar and Ashima Goyal

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