Populism, Group Thinking and Banking Policy

Donato Masciandaro () and Federico Faveretto

No 20133, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: This paper builds a model of populism called Democratic Rioting in which citizens - i.e., the poor and teh rich - are assumed to be heavily influenced by psychological group dynamics that result from banking shocks. We highlight a display of anger that is channelled through an election instead of in the streets. In turn the anger - a self-serving bias - can be influenced by non-financial news about immigration, welfare plans and housing plans. Therefore after a banking shock the consensus on a myopic populisr policy can depend on many issues that have nothing to do with the bailout decision itself. We describe a mechanism that can be applied to the aftermath of both the Great Recession and the Great Depression.

Keywords: Populism; Political Economics; Behavioural economics; Financial inequality; Banking policy (search for similar items in EconPapers)
JEL-codes: D72 D78 E31 E52 E58 E62 E71 (search for similar items in EconPapers)
Pages: 18
Date: 2020
New Economics Papers: this item is included in nep-mac and nep-pol
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Citations: View citations in EconPapers (1)

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