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Do banking crises improve democracy?

Author

Listed:
  • Beni Kouevi-Gath

    (Université libre de Bruxelles (ULB))

  • Pierre-Guillaume Méon

    (Université libre de Bruxelles (ULB))

  • Laurent Weill

    (University of Strasbourg
    MGIMO University)

Abstract

We study the relationship between banking crises and the level of democracy. We use an event-study method on a sample of up to 129 countries over the period 1975–2010 featuring 94 systemic banking crises. We find that banking crises are followed by an improvement in democracy and report evidence suggesting that the relation may be causal. The bulk of the improvement takes place between 3 and 10 years after the banking crisis. The impact of a banking crisis is greater in non-democratic countries and when the banking crisis is severe. We explain this finding by the fact that banking crises create windows of opportunity to contest autocratic regimes.

Suggested Citation

  • Beni Kouevi-Gath & Pierre-Guillaume Méon & Laurent Weill, 2021. "Do banking crises improve democracy?," Public Choice, Springer, vol. 186(3), pages 413-446, March.
    • Handle: RePEc:kap:pubcho:v:186:y:2021:i:3:d:10.1007_s11127-019-00730-3
    DOI: 10.1007/s11127-019-00730-3
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Bankkriser kan stärka demokratin
      by Niclas Berggren in Nonicoclolasos on 2019-06-07 04:28:03

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    Cited by:

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    2. Osei-Tutu, Francis & Weill, Laurent, 2023. "Democracy favors access to credit of firms," European Journal of Political Economy, Elsevier, vol. 77(C).
    3. Mohamed Sami Ben Ali & Sami Ben Mim, 2023. "Democracy and Banking Stability: Is the Relationship U-Shaped?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4426-4448, December.

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    More about this item

    Keywords

    Banking crisis; Democracy; Regime change; Transitions;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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