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Blaming Your Predecessor: Government Turnover and External Financial Assistance

Author

Listed:
  • Bermejo, Vicente
  • Gago, Andrés
  • Carozzi, Felipe
  • Abad, José María

Abstract

Borrowing from a lender of last resort reveals negative information about a government's past economic performance. This could make officials with previous government responsibilities more reluctant to request financial assistance. To study this, we analyze decisions made by 4,000 Spanish municipalities following a credit shock after the Great Recession. Regression-discontinuity estimates show newly elected executives are 30 percentage points more likely than re-elected incumbents to publicly agree on a financing program with the national government. Analyses of press coverage, news content using ChatGPT, and politicians' survey responses, indicate incumbents avoid the bailout to safeguard their image, despite this being suboptimal.

Suggested Citation

  • Bermejo, Vicente & Gago, Andrés & Carozzi, Felipe & Abad, José María, 2023. "Blaming Your Predecessor: Government Turnover and External Financial Assistance," CEPR Discussion Papers 18313, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18313
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    More about this item

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance

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