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Do Banking Crises Improve Democracy?

Beni Kouevi Gath, Pierre-Guillaume Méon () and Laurent Weill ()

No 19-009, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: We study the impact of banking crises on the level of democracy. We use an event-study method on a sample of up to 129 countries over the period 1975-2010 accounting for 94 systemic banking crises. We find that banking crises are followed by an improvement in democracy and report evidence suggesting that the relation is causal. The bulk of the improvement takes place between 3 and 10 year after the banking crisis. The impact of a banking crisis is greater in non-democratic countries and when the banking crisis is severe. We explain this finding by the fact that banking crises create windows of opportunity to contest autocratic regimes.

Keywords: Banking crisis; Democracy; Regime change; Transitions (search for similar items in EconPapers)
JEL-codes: D72 H11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-his and nep-pol
Date: 2019-05-10
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