Political Booms, Financial Crises

Helios Herrera (h.herrera@warwick.ac.uk), Guillermo Ordoñez (ordonez@econ.upenn.edu) and Christoph Trebesch
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Guillermo Ordoñez: Department of Economics, University of Pennsylvania and NBER
Authors registered in the RePEc Author Service: Guillermo L. Ordonez

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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: D81 D82 E44 E51 E58 G01 N10 N20 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2014-07-23
New Economics Papers: this item is included in nep-dem, nep-mac and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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https://economics.sas.upenn.edu/sites/default/files/filevault/14-024.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:pen:papers:14-024

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