Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212426 
Year of Publication: 
2018
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 18/2018
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Does democratization reduce the cost of credit? Using global syndicated loan data from 1984 to 2014, we find that democratization has a sizeable negative effect on loan spreads: a one-point increase in the zero-to-ten Polity IV index of democracy shaves at least 19 basis points off spreads, but likely more. Reversals to autocracy hike spreads more strongly. Our findings are robust to the comprehensive inclusion of relevant controls, to the instrumentation with regional waves of democratization, and to a battery of other sensitivity tests. We thus highlight the lower cost of loans as one relevant mechanism through which democratization can affect economic development.
JEL: 
G21
G30
P16
P26
P27
P47
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-242-6
Document Type: 
Working Paper

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