|Englmaier, Florian; Stowasser, Till (14. May 2014): Electoral cycles in savings bank lending. Discussion Papers in Economics 2014-14|
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.
|Item Type:||Paper (Discussion Paper)|
|Keywords:||Bank lending cycles, political business cycles, political connectedness, public banks, government ownership of firms|
Economics > Munich Discussion Papers in Economics
|Subjects:||300 Social sciences > 330 Economics|
|JEL Classification:||G21, D72, D73|
|Deposited On:||15. May 2014 08:29|
|Last Modified:||01. May 2016 03:19|
Akhmedov, A. and Zhuravskaya, E. (2004). Opportunistic political cycles: Test in a young democracy setting. Quarterly Journal of Economics, 119, 1301–1338.
Alesina, A., Roubini, N. and Cohen, G. D. (1997). Political cycles and the macroeconomy. MIT Press.
Angrist, J. D. and Pischke, J.-S. (2009). Mostly harmless econometrics. Princeton University Press.
Atkinson, A. B. and Stiglitz, J. E. (1980). Lectures on public economics. McGraw Hill.
Bertrand, M., Duflo, E. and Mullainathan, S. (2004). How much should we trust differences-in-differences estimates? Quarterly Journal of Economics, 119 (1), 249–275.
—Kramarz, F., Schoar, A. and Thesmar, D. (2007). Politicians, firms and the political business cycle: Evidence from France. mimeo.
Cameron, A. C. and Miller, D. L. (2010). Robust inference with clustered data. mimeo.
— and Trivedi, P. K. (2010). Microeconometrics using Stata. Stata Press.
Carvalho, D. (2012). The real effects of government-owned banks. Journal of Finance, forthcoming.
Cole, S. A. (2009). Fixing market failures or fixing elections? elections, banks and agricultural lending in India. American Economic Journal: Applied Economics, 1(1), 219–250.
Dinç, I. S. (2005). Politicians and banks: Political influences on governmentowned banks in emerging markets. Journal of Financial Economics, 77 (2), 453–479.
Engerer, H. (2006). Vom Dreisäulensystem zum Baustein des Europäischen Hauses: Wandel von Eigentum und Wettbewerb im deutschen Bankensektor. DIW Vierteljahreshefte zur Wirtschaftsforschung, 75 (4), 11–32.
Fischer, M., Hainz, C., Rocholl, J. and Steffen, S. (2011). Government guarantees and bank risk taking incentives. Working Paper EMTS.
Gropp, R., Grundl, C. and Guttler, A. (2011). The impact of public guarantees on bank risk taking: Evidence from a natural experiment. Working Paper Tilburg University.
Gruber, J. (1994). The incidence of mandated maternity benefits. American Economic Review, 84 (3), 622–641.
Güde, U. (1995). Geschäftspolitik der Sparkassen: Grundlagen und aktuelle Probleme. Deutscher Sparkassenverlag Stuttgart.
Guinnane, T. W. (2002). Delegated monitors: Large and small: Germany’s banking system, 1800–1914. Journal of Economic Literature, 40, 73–124.
Hakenes, H. and Schnabel, I. (2011). Capital regulation, bank competition, and financial stability. Economic Letters, 113 (3), 256–258.
Khwaja, A. I. and Mian, A. (2005). Do lenders favor politically connected firms? rent provision in an emerging financial market. Quarterly Journal of Economics, 120 (4), 1371–1411.
La Porta, R., Lopez de Silanes, F. and Shleifer, A. (2002). Government ownership of banks. Journal of Finance, 57 (1), 265–301.
MacRae, D. C. (1977). A political model of the business cycle. Journal of Political Economy, 85 (2), 239–263.
Mitchell, D. M. and Willett, K. (2006). Local economic performance and election outcomes. Atlantic Economic Journal, 34 (2), 219–232.
Nordhaus, W. D. (1975). The political business cycle. Review of Economic Studies, 42 (2), 169–190.
Peltzman, S. (1987). Economic conditions and gubernatorial elections. American Economic Review, 77(2), 293–297.
Sapienza, P. (2004). The effects of government ownership on bank lending. Journal of Financial Economics, 72 (2), 357–384.
Schlierbach, H. (2003). Das Sparkassenrecht in der Bundesrepublik Deutschland. Deutscher Sparkassenverlag Stuttgart.
Schneider, C. (2010). Fighting with one hand tied behind the back: Political budget cycles in the West German states. Public Choice, 142 (1), 125–150.
Schwartz, A. J. (2009). Origins of the financial market crisis of 2008. Cato Journal, 29(1), 19–23.
Shleifer, A. and Vishny, R. W. (1994). Politicians and firms. Quarterly Journal of Economics, 109 (4), 995–1025.
Smart, M. and Sturm, D. M. (2007). Do politicians respond to reelection incentives? evidence from gubernatorial elections. Working Paper LSE.
Wolfers, J. (2007). Are voters rational? evidence from gubernatorial elections. Working Paper Wharton School.