American Economic Journal: Economic Policy
no. 4, November 2023
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."
"Electoral Cycles in Macroprudential Regulation."
American Economic Journal: Economic Policy,
Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
Business Fluctuations; Cycles
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation