Electoral cycles in macroprudential regulation
Karsten Müller ()
No 106, ESRB Working Paper Series from European Systemic Risk Board
Do politics matter for macroprudential policy? I show that changes to macroprudential regulation exhibit a predictable electoral cycle in the run-up to 221 elections across 58 countries from 2000 through 2014. Policies restricting mortgages and consumer credit are systematically less likely to be tightened before elections during credit booms and economic expansions. Consistent with theories of opportunistic political cycles, this pattern is stronger when election outcomes are uncertain or in countries where political interference is more likely. In contrast to monetary policy, I find limited evidence that central banks are uniquely insulated from political cycles in macroprudential policy. These results suggest that political pressures may limit the ability of regulators to “lean against the wind.” JEL Classification: G18, G21, G28, D72, D73, P16
Keywords: central bank independence; electoral cycles; macroprudential regulation; political economy; regulatory cycles (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cdm, nep-mac and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:2019106
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