Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/104426 
Year of Publication: 
2014
Series/Report no.: 
Munich Discussion Paper No. 2014-14
Publisher: 
Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät, München
Abstract: 
We provide causal 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.
Subjects: 
Bank lending cycles
political business cycles
political connectedness
public banks
government ownership of firms
JEL: 
G21
D72
D73
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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