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Financial policymaking after crises: Public vs. private interests

Orkun Saka, Yuemei Ji and Paul De Grauwe

No 10/2021, BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition

Abstract: We first present a simple model of post-crisis policymaking driven by both public and private interests. Using a novel dataset covering 94 countries between 1973 and 2015, we then establish that financial crises can lead to government interventions in financial markets. Consistent with a public interest channel, we find post-crisis interventions occur only in democratic countries. However, by using a plausibly exogenous setting -i.e., term limits- muting political accountability, we show that democratic leaders who do not have re-election concerns are substantially more likely to intervene in financial markets after crises, in ways that may promote (obstruct) private (public) interests.

JEL-codes: G01 G28 P11 P16 (search for similar items in EconPapers)
Date: 2021-07-06
New Economics Papers: this item is included in nep-fdg and nep-his
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