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Populistic Surfing: Consensus, Monetary and Banking Policies

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  • Federico Favaretto and Donato Masciandaro

Abstract

This chapter, using a political economy approach, uncovers the relationships between populism, on the one side, and monetary and banking policies, on the other side. The analysis is based on three assumptions. First, both monetary and banking policies can produce redistributive effects. Second, political consensus can be associated with redistribution. Third, populists, being politicians, are myopic players, hence heavily influenced by citizens’ financial and group heterogeneities. Given these assumptions, two different models are studied. Concerning monetary policies, a nexus between populism and central bank (in)dependence (CBI) can emerge where the populist aim to influence the monetary policy design after a macroeconomic shock that requires public bailouts. Regarding banking policy, our chapter defines populism as Democratic Rioting, in which citizens are assumed to be heavily influenced in their policy choice by psychological group dynamics. This explains why populist consensus emerges and may deliver different policy choices depending on non-banking news such as public welfare choices and immigration.

Suggested Citation

  • Federico Favaretto and Donato Masciandaro, 2026. "Populistic Surfing: Consensus, Monetary and Banking Policies," BAFFI CAREFIN Working Papers 26267, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:baf:cbafwp:cbafwp26267
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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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