American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Electoral Cycles in Macroprudential Regulation
American Economic Journal: Economic Policy
vol. 15,
no. 4, November 2023
(pp. 295–322)
Abstract
Do politics matter for macroprudential policies? I show that changes in macroprudential regulation exhibit a predictable electoral cycle in the run-up to 221 elections across 58 countries from 2000 through 2014. Policies restricting mortgages and consumer credit are systematically looser before elections, particularly during economic expansions. Consistent with theories of opportunistic political cycles, this pattern is stronger when election outcomes are uncertain, regulators are closely tied to politicians, and institutions are poor. These results suggest that political pressures may limit the ability of regulators to "lean against the wind."Citation
Müller, Karsten. 2023. "Electoral Cycles in Macroprudential Regulation." American Economic Journal: Economic Policy, 15 (4): 295–322. DOI: 10.1257/pol.20200626Additional Materials
JEL Classification
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E32 Business Fluctuations; Cycles
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation
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