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Do Banking Crises Improve Democracy?

Author

Listed:
  • Beni Kouevi Gath
  • Pierre-Guillaume Méon
  • Laurent Weill

Abstract

We study the impact of banking crises on the level of democracy. We use an event-study method on a sample of up to 129 countries over the period 1975-2010 accounting for 94 systemic banking crises. We find that banking crises are followed by an improvement in democracy and report evidence suggesting that the relation is causal. The bulk of the improvement takes place between 3 and 10 year 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, 2019. "Do Banking Crises Improve Democracy?," Working Papers CEB 19-009, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/287172
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
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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

    More about this item

    Keywords

    Banking crisis; Democracy; Regime change; Transitions;

    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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