Populistic Surfing: Consensus, Monetary and Banking Policies

Federico Favaretto and Donato Masciandaro

No 26267, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: This chapter, using a political economy approach, uncovers the relationships between populism, on the one side, and monetary and banking policies, on the other side. The analysis is based on three assumptions. First, both monetary and banking policies can produce redistributive effects. Second, political consensus can be associated with redistribution. Third, populists, being politicians, are myopic players, hence heavily influenced by citizens’ financial and group heterogeneities. Given these assumptions, two different models are studied. Concerning monetary policies, a nexus between populism and central bank (in)dependence (CBI) can emerge where the populist aim to influence the monetary policy design after a macroeconomic shock that requires public bailouts. Regarding banking policy, our chapter defines populism as Democratic Rioting, in which citizens are assumed to be heavily influenced in their policy choice by psychological group dynamics. This explains why populist consensus emerges and may deliver different policy choices depending on non-banking news such as public welfare choices and immigration.

Keywords: Populism; Political Economics; Monetary Policy; Banking Policy; Inequality; Central Bank Independence; Behavioural economics (search for similar items in EconPapers)
JEL-codes: D72 D78 E31 E52 E58 E62 E71 P16 (search for similar items in EconPapers)
Pages: 17
Date: 2026
New Economics Papers: this item is included in nep-cba and nep-mon
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