Resolving Debt Overhang: Political Constraints in the Aftermath of Financial Crises / Atif R. Mian, Amir Sufi, Francesco Trebbi.

Format:

Book

Author/Creator:

Mian, Atif R.

Contributor:

National Bureau of Economic Research.

Sufi, Amir.

Trebbi, Francesco.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17831.

NBER working paper series no. w17831

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

Debtors bear the brunt of a decline in asset prices associated with financial crises and policies aimed at partial debt relief may be warranted to boost growth in the midst of crises. Drawing on the US experience during the Great Recession of 2008-09 and historical evidence in a large panel of countries, we explore why the political system may fail to deliver such policies. We find that during the Great Recession creditors were able to use the political system more effectively to protect their interests through bailouts. More generally we show that politically countries become more polarized and fractionalized following financial crises. This results in legislative stalemate, making it less likely that crises lead to meaningful macroeconomic reforms.

Notes:

Print version record

February 2012.