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Political regimes and financial crises

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  • Rashad Hasanov
  • Prasad Sankar Bhattacharya
Abstract
This study investigates how democratic or autocratic regimes, their transitions, and durations, affect the probability of experiencing financial crises. The empirical strategy employs novel instruments and Lewbel's method to address potential endogeneity concerns. The results reveal that democratic transition reduces the probability of crises by around seven percent, whereas autocratic switchovers enhance the crises likelihood by twelve percent. The findings remain robust in presence of a number of heterogeneity checks, with alternative measures of crises indicators, and employing different proxy for democratic transition. Thus, institutions in transition countries could play important role in managing such financial upheavals.

Suggested Citation

  • Rashad Hasanov & Prasad Sankar Bhattacharya, 2023. "Political regimes and financial crises," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(4), pages 285-318, September.
    • Handle: RePEc:bla:scotjp:v:70:y:2023:i:4:p:285-318
    DOI: 10.1111/sjpe.12341
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