Political Booms, Financial Crises

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4935

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Financial Markets and the Macroeconomy ; Money Supply; Credit; Money Multipliers ; Central Banks and Their Policies ; Financial Crises ; Crisis Management ; Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative ; Economic History: Financial Markets and Institutions: General, International, or Comparative
• Subject: credit booms ; reputation ; financial crises ; political popularity ; emerging markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Herrera, Helios ; Ordoñez, Guillermo ; Trebesch, Christoph
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/102149
• Last update: 10.03.2025, 11:45 AM CET