Political Booms, Financial Crises

Helios Herrera (), Guillermo Ordonez and Christoph Trebesch

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: We show that political booms, measured by the rise in governments’ popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging economies are more concerned about their reputation and tend to ride the short-term popularity benefits of weak credit booms rather than implementing politically costly corrective policies that would help prevent potential crises. We provide evidence of the relevance of this reputation mechanism.

Keywords: Credit Booms; Reputation; Financial Crises; Political Popularity; Emerging Markets (search for similar items in EconPapers)
JEL-codes: D82 E44 E51 E58 G01 H12 N10 N20 (search for similar items in EconPapers)
Date: 2014-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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https://epub.ub.uni-muenchen.de/21265/1/PoliticalBooms-2.pdf (application/pdf)

Related works:
Journal Article: Political Booms, Financial Crises (2020)
Working Paper: Political Booms, Financial Crises (2014)
Working Paper: Political Booms, Financial Crises (2014)
Working Paper: Political Booms, Financial Crises (2014)
Working Paper: Political Booms, Financial Crises (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:21265

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