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Political Economic Pressures in Financial Crisis Resolution

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  • Lim, Jamus Jerome

Abstract

The free flow of global capital has resulted in destabilizing financial crises, coupled with significant redistributive effects. However, the existing literature has not adequately addressed the channels for this redistribution, nor the different factors that influence the formation of post-crisis redistributive policy. This paper develops a microfounded theoretical model that applies the modeling framework of special interest lobbying together with bilateral bargaining to the formation of equilibrium lending, bailout, and reallocation decisions. The paper then takes the theoretical model to the data, testing two key predictions of the model using both micro- and macro-level datasets. Finally, implications for international financial reform are then examined in light of the model's findings.

Suggested Citation

  • Lim, Jamus Jerome, 2007. "Political Economic Pressures in Financial Crisis Resolution," MPRA Paper 5511, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5511
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    File URL: https://mpra.ub.uni-muenchen.de/5511/1/MPRA_paper_5511.pdf
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    References listed on IDEAS

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    1. Roberto Chang & Andres Velasco, 2001. "A Model of Financial Crises in Emerging Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 489-517.
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    More about this item

    Keywords

    Financial crisis; redistribution; special interest politics; IMF;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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