Financial Crisis, Creditor-Debtor Conflict, and Populism
67 Pages Posted: 10 Jan 2019 Last revised: 18 Feb 2020
Date Written: April 1, 2019
We study the impact of debtor distress during a financial crisis on support for a populist far-right party. Our empirical approach exploits variation in exposure to foreign currency household loans during a currency crisis in Hungary. Foreign currency debt exposure leads to a large and persistent increase in the far-right vote share. We present evidence that conflict between creditors and debtors over the resolution of the crisis is an important mechanism in the electoral success of the populist far right. Our results shed light on why financial crises are often followed by increased support for populist parties.
Keywords: populism, far-right parties, political extremism, financial crisis, household debt, foreign currency debt
JEL Classification: D10, D72, E44, F34, G01
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