Financial policymaking after crises: Public vs. private interests
Yuemei Ji and
Paul De Grauwe
No 10/2021, BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition
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)
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Persistent link: https://EconPapers.repec.org/RePEc:bof:bofitp:2021_010
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