Elections, Special Interests, and the Fiscal Costs of Financial Crisis

The author proposes a new approach to explain why the costs of crisis are greater in some countries than in others. He begins with the premise that many crises result from the willingness of politicians to cater to special interests, at the expense...

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Bibliographic Details
Main Author:	Keefer, Philip
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, D.C. 2013
Subjects:	ACCOUNTABILITY AGRICULTURE AMBITION BAILOUT COSTS BANK ASSETS BANK DEPOSITS BANK FAILURES BANK INSOLVENCY BANK LIABILITIES BANK RUN BANK SIZE BANKING CRISES BANKING DEPOSITS BANKING OPERATIONS BANKING SECTOR BANKING SYSTEM BANKS CAMPAIGN CONTRIBUTIONS CAPITAL FLOWS CHECKS CITIZENS COMPETITIVENESS CONSTITUENCIES CORRUPTION CURRENCY CURRENT ACCOUNT DEBT DECISION MAKING DEMOCRACIES DEMOCRATIC COUNTRIES DEPOSIT INSURANCE DEVALUATION DISCOUNT RATES DISTRICTS ECONOMIC PERFORMANCE ECONOMIC SECTORS ECONOMIC SHOCKS ELECTIONS EMPIRICAL EVIDENCE EXOGENOUS SHOCKS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEM FISCAL POLICIES FOREIGN EXCHANGE GDP GOVERNMENT OFFICIALS GOVERNMENT SPENDING ILLIQUIDITY INDEBTEDNESS INSURANCE JURISDICTIONS LEGISLATION LEGISLATIVE DECISIONS LEGISLATORS LEGISLATURE LENDING PRACTICES LIQUIDITY LOBBYING LOBBYISTS NATIONAL INCOME OFFSETTING PARLIAMENTARY SYSTEMS POLICY IMPLEMENTATION POLITICAL INSTITUTIONS POLITICIANS PRESIDENTS PUBLIC SPENDING REAL INTEREST RATE RECAPITALIZATION REGULATORY POLICY REPRESENTATIVES SAVINGS SEPARATION OF POWERS SMALL BANKS SOCIAL GROUPS TERMS OF TRADE VETO VETO POWER VOTERS
Online Access:	http://documents.worldbank.org/curated/en/2004/10/5304231/elections-special-interests-fiscal-costs-financial-crisis http://hdl.handle.net/10986/14204

Description
Summary:	The author proposes a new approach to explain why the costs of crisis are greater in some countries than in others. He begins with the premise that many crises result from the willingness of politicians to cater to special interests, at the expense of broad social interests. A parsimonious model predicts that the less costly it is for average citizens to expel politicians, the more veto players there are; the less important are exogenous shocks, and the more difficult it is for politicians and special interests to forge credible agreements, the lower the costs of crisis are. Though these predictions differ from those in the literature, empirical evidence presented shows that they explain the fiscal costs of financial crisis, even after controlling for the financial sector policies believed to contribute most to the efficient prevention, and resolution of financial crisis.

Elections, Special Interests, and the Fiscal Costs of Financial Crisis

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