Political Environment and Financial Crises

International Journal of Finance & Economics. https://onlinelibrary.wiley.com/doi/abs/10.1002/ijfe.2160

39 Pages Posted: 5 Dec 2019 Last revised: 16 Jan 2021

See all articles by Thanh Cong Nguyen

Thanh Cong Nguyen

Phenikaa University

Vítor Castro

Loughborough University

Justine A Wood

Loughborough University - School of Business and Economics

Date Written: August 10, 2020

Abstract

This paper assesses the role of the political environment in the timing of financial crises over a sample of 85 countries during the period 1975-2017. We consider systemic banking, currency, and sovereign debt crises in addition to twin and triple crises. Using a fixed effects logit model, this study shows that banking and currency crises are more likely to occur within one year after elections. There is also evidence that the probability of currency crises increases when right-wing parties are in office. Moreover, time in office of incumbent chief executives reduces the likelihood of any type of financial crises. The incidence of twin and triple crises is lower when majority governments are in office. This study contributes to the literature by calling attention to the importance of some political factors for different types of financial crises.

Keywords: Financial Crisis; Political Environment; Economic Uncertainty

JEL Classification: G01, D72, C25

Suggested Citation

Nguyen, Thanh Cong and Castro, Vítor and Wood, Justine A, Political Environment and Financial Crises (August 10, 2020). International Journal of Finance & Economics. https://onlinelibrary.wiley.com/doi/abs/10.1002/ijfe.2160, Available at SSRN: https://ssrn.com/abstract=3489859 or http://dx.doi.org/10.2139/ssrn.3489859

Thanh Cong Nguyen (Contact Author)

Phenikaa University ( email )

To Huu road, Yen Nghia
Ha Dong district
Hanoi, Hanoi 100803
Vietnam

Vítor Castro

Loughborough University ( email )

Ashby Road
Nottingham NG1 4BU
Great Britain

Justine A Wood

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

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