Financial Crisis, Creditor-Debtor Conflict, and Populism
103 Pages Posted: 10 Jan 2019 Last revised: 29 Apr 2021
Date Written: April 2021
We study the impact of debtor distress during a financial crisis on support for a populist far-right political 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 support for the far-right populist party. We present evidence that the far right advocated for foreign currency debtors’ interests by proposing aggressive debt relief and was rewarded with support from these voters. Our findings are consistent with theories emphasizing that conflict between creditors and debtors can shape political outcomes after financial crises.
Keywords: populism, far-right parties, financial crisis, household debt, foreign currency debt
JEL Classification: D10, D72, E44, F34, G01
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