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Electoral Cycles in Savings Bank Lending

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  • Florian Englmaier
  • Till Stowasser

Abstract

We provide evidence that German savings banks – where local politicians are by law involved in their management – systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of cooperative banks – that are very similar to savings banks but lack their political connectedness – allow for clean identification of causal effects of county elections on savings banks’ lending. These effects are economically meaningful and robust to various specifications. Moreover, politically induced lending increases in incumbent party entrenchment and in the contestedness of upcoming elections.

Suggested Citation

  • Florian Englmaier & Till Stowasser, 2013. "Electoral Cycles in Savings Bank Lending," CESifo Working Paper Series 4402, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4402
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    References listed on IDEAS

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    1. Florian Englmaier & Till Stowasser, 2017. "Electoral Cycles in Savings Bank Lending," Journal of the European Economic Association, European Economic Association, vol. 15(2), pages 296-354.
    2. Hainz, Christa & Hakenes, Hendrik, 2012. "The politician and his banker — How to efficiently grant state aid," Journal of Public Economics, Elsevier, vol. 96(1), pages 218-225.
    3. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1301-1338.
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    6. Hella Engerer, 2006. "Vom Dreisäulensystem zum Baustein des europäischen Hauses: Wandel von Eigentum und Wettbewerb im deutschen Bankensektor," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 75(4), pages 11-32.
    7. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, March.
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    Citations

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    Cited by:

    1. Haskamp, Ulrich, 2017. "Improving the forecasts of European regional banks' profitability with machine learning algorithms," Ruhr Economic Papers 705, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. repec:kap:iecepo:v:15:y:2018:i:2:d:10.1007_s10368-017-0404-4 is not listed on IDEAS
    3. Englmaier, Florian & Stowasser, Till, 2013. "Electoral cycles in savings bank lending," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 508, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    4. Ghosh, Saibal, 2016. "Political transition and bank performance: How important was the Arab Spring?," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 372-382.
    5. Florian Englmaier & Till Stowasser, 2017. "Electoral Cycles in Savings Bank Lending," Journal of the European Economic Association, European Economic Association, vol. 15(2), pages 296-354.
    6. Foremny, Dirk & Freier, Ronny & Moessinger, Marc-Daniel & Yeter, Mustafa, 2014. "Overlapping political budget cycles in the legislative and the executive," ZEW Discussion Papers 14-099, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. Belke, Ansgar & Haskamp, Ulrich & Setzer, Ralph, 2016. "Regional bank efficiency and its effect on regional growth in “normal” and “bad” times," Economic Modelling, Elsevier, vol. 58(C), pages 413-426.
    8. Belke, Ansgar & Setzer, Ralph & Haskamp, Ulrich, 2016. "Bank efficiency and regional growth in Europe: new evidence from micro-data," Working Paper Series 1983, European Central Bank.
    9. Gabriel Jiménez & José-Luis Peydró & Rafael Repullo & Jesús Saurina, 2017. "Burning Money? Government Lending in a Credit Crunch," Working Papers 984, Barcelona Graduate School of Economics.
    10. Gropp, Reint E. & Saadi, Vahid, 2015. "Electoral Credit Supply Cycles Among German Savings Banks," IWH Online 11/2015, Halle Institute for Economic Research (IWH).
    11. Behn, Markus & Haselmann, Rainer & Kick, Thomas & Vig, Vikrant, 2015. "The political economy of bank bailouts," IMFS Working Paper Series 86, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    12. Martin, Thorsten, 2017. "You shall not build! (until tomorrow) [:] Electoral cycles and housing policies in Germany," MPRA Paper 78998, University Library of Munich, Germany.
    13. Schoors, Koen & Weill, Laurent, 2017. "Russia's 1999–2000 election cycle and the politics-banking interface," BOFIT Discussion Papers 17/2017, Bank of Finland, Institute for Economies in Transition.
    14. Haskamp, Ulrich, 2016. "Spillovers of banking regulation: The effect of the German bank levy on the lending rates of regional banks and their local competitors," Ruhr Economic Papers 664, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    15. Haselmann, Rainer & Schoenherr, David & Vig, Vikrant, 2017. "Rent-seeking in elite networks," SAFE Working Paper Series 132, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    16. Koetter, Michael & Popov, Alexander, 2018. "Politics, banks, and sub-sovereign debt: unholy trinity or divine coincidence?," Working Paper Series 2146, European Central Bank.
    17. Englmaier, Florian & Roider, Andreas & Stowasser, Till & Hinreiner, Lisa, 2017. "Power Politics: Electoral Cycles in German Electricity Prices," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168267, Verein für Socialpolitik / German Economic Association.
    18. Koetter, Michael & Krause, Thomas & Tonzer, Lena, 2017. "Delay determinants of European Banking Union implementation," IWH Discussion Papers 24/2017, Halle Institute for Economic Research (IWH).

    More about this item

    Keywords

    bank lending cycles; political business cycles; political connectedness; public banks; government ownership of firms;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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