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The political economy of financial crisis policy

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  • Mícheál O’Keeffe
  • Alessio Terzi

Abstract

We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. Governments in presidential systems are associated with lower fiscal costs of crisis management because they are less likely to use costly bank guarantees, thus reducing the exposure of the state to significant contingent and direct fiscal liabilities. Consistent with these findings we find further evidence that these governments are less likely to use bank recapitalisation and more likely to impose losses on depositors.

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  • Mícheál O’Keeffe & Alessio Terzi, 2015. "The political economy of financial crisis policy," Working Papers 888, Bruegel.
  • Handle: RePEc:bre:wpaper:888
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    Cited by:

    1. Achim Wambach & Ines Läufer, 2015. "Europäische Wirtschafts- und Währungsunion: Lernen aus der Krise," Otto-Wolff-Institut Discussion Paper Series 02/2015, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.

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