Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/102149 
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper No. 4935
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We show that political booms, measured by the rise in governments' popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging economies are more concerned about their reputation and tend to ride the short-term popularity benefits of weak credit booms rather than implementing politically costly corrective policies that would help prevent potential crises. We provide evidence of the relevance of this reputation mechanism.
Subjects: 
credit booms
reputation
financial crises
political popularity
emerging markets
JEL: 
D82
E44
E51
E58
G01
H12
N10
N20
Document Type: 
Working Paper
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