Financial Policymaking after Crises: Public vs. Private Interests

107 Pages Posted: 11 Jun 2021

See all articles by Orkun Saka

Orkun Saka

City, University of London; London School of Economics & Political Science (LSE); Systemic Risk Centre & STICERD; CESifo Network

Yuemei Ji

University College London - School of Slavonic and East European Studies

Paul De Grauwe

London School of Economics & Political Science (LSE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)

Date Written: 2021

Abstract

We first present a simple model of post-crisis policymaking driven by both public and private interests. Using a novel dataset covering 94 countries between 1973 and 2015, we then establish that financial crises can lead to government interventions in financial markets. Consistent with a public interest channel, we find post-crisis interventions occur only in democratic countries. However, by using a plausibly exogenous setting -i.e., term limits- muting political accountability, we show that democratic leaders who do not have re-election concerns are substantially more likely to intervene in financial markets after crises, in ways that may promote (obstruct) private (public) interests.

JEL Classification: G010, G280, P110, P160

Suggested Citation

Saka, Orkun and Ji, Yuemei and De Grauwe, Paul, Financial Policymaking after Crises: Public vs. Private Interests (2021). CESifo Working Paper No. 9131, Available at SSRN: https://ssrn.com/abstract=3863834

Orkun Saka (Contact Author)

City, University of London ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

London School of Economics & Political Science (LSE)

Houghton Street
London, WC2A 2AE
United Kingdom

Systemic Risk Centre & STICERD

Houghton Street
London, WC2A 2AE
United Kingdom

CESifo Network

Poschinger Str. 5
Munich, DE-81679
Germany

Yuemei Ji

University College London - School of Slavonic and East European Studies ( email )

Malet Street
London WC1E 7HU
United Kingdom

Paul De Grauwe

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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