The electoral consequences of the Great Recession are analysed in this article by combining insights from economic voting theories and the literature on party system change. Taking cues from these ...two theoretical perspectives, the impact of the Great Recession on the stability and change of Western, Central and Eastern European party systems is assessed. The article starts from the premise that, in order to fully assess the impact of the contemporary crisis, classic economic voting hypotheses focused on incumbent parties need to be combined with accounts of long‐term party system change provided by realignment and dealignment theories. The empirical analysis draws on an original dataset of election results and economic and political indicators in 30 European democracies. The results indicate that during the Great Recession economic strain was associated with sizable losses for incumbent parties and an increasing destabilisation of Western European party systems, while its impact was significantly weaker in Central and Eastern European countries, where political rather than economic failures appeared to be more relevant. In line with the realignment perspective, the results also reveal that in Western Europe populist radical right, radical left and non‐mainstream parties benefited the most from the economic hardship, while support for mainstream parties decreased further.
The eurozone crisis has altered the party political landscape across Europe. The most visible effect is the rise of challenger parties. The crisis not only caused economic hardship, but also placed ...considerable fiscal constraints upon a number of national governments. Many voters have reacted to this by turning their back on the traditional parties and opting instead for new, or reinvigorated, challenger parties that reject the mainstream consensus of austerity and European integration. This article argues that both sanctioning and selection mechanisms can help to explain this flight from the centre to challenger parties. First, voters who were economically adversely affected by the crisis punish mainstream parties both in government and in opposition by voting for challenger parties. Second, the choice of specific challenger party is shaped by preferences on three issues that directly flow from the euro crisis: EU integration, austerity and immigration. Analysing both aggregate-level and individual-level survey data from all 17 Western EU member states, this article finds strong support for both propositions and shows how the crisis has reshaped the nature of party competition in Europe.
The Global Crisis and Equity Market Contagion BEKAERT, GEERT; EHRMANN, MICHAEL; FRATZSCHER, MARCEL ...
The Journal of finance (New York),
December 2014, Letnik:
69, Številka:
6
Journal Article
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We analyze the transmission of the 2007 to 2009 financial crisis to 415 country-industry equity portfolios. We use a factor model to predict crisis returns, defining unexplained increases in factor ...loadings and residual correlations as indicative of contagion. While we find evidence of contagion from the United States and the global financial sector, the effects are small. By contrast, there has been substantial contagion from domestic markets to individual domestic portfolios, with its severity inversely related to the quality of countries' economic fundamentals. This confirms the "wake-up call" hypothesis, with markets focusing more on country-specific characteristics during the crisis.
We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship banks gather information on their borrowers, allowing them to provide ...loans to profitable firms during a crisis. Because of the services they provide, operating costs of relationship banks are higher than those of transaction banks. Relationship banks charge a higher intermediation spread in normal times, but offer continuation lending at more favourable terms than transaction banks to profitable firms in a crisis. Using credit register information for Italian banks before and after the Lehman Brothers' default, we test the theoretical predictions of the model.
Using a novel dataset, which merges good-level prices underlying the PPI with the respondents' balance sheets, we show that liquidity constrained firms increased prices in 2008, while their ...unconstrained counterparts cut prices. We develop a model in which firms face financial frictions while setting prices in customer markets. Financial distortions create an incentive for firms to raise prices in response to adverse financial or demand shocks. This reaction reflects the firms ' decisions to preserve internal liquidity and avoid accessing external finance, factors that strengthen the countercyclical behavior of markups and attenuate the response of inflation to fluctuations in output.
Partisans often perceive real world conditions in a manner that credits their own party. Yet recent findings suggest that partisans are capable of setting their loyalties aside when confronted with ...clear evidence, for example, during an economic crisis. This study examines a different possibility. While partisans may acknowledge the same reality, they may find other ways of aligning undeniable realities with their party loyalties. Using monthly survey data collected before and after the unexpected collapse of the British national economy (2004–10), this study presents one key finding: As partisans came to agree that economic conditions had gotten much worse, they conversely polarized in whether they thought the government was responsible. While the most committed partisans were surprisingly apt in acknowledging the economic collapse, they were also the most eager to attribute responsibility selectively. For that substantial share of the electorate, partisan-motivated reasoning seems highly adaptive.
The European Union (EU) project of combining a single market with a common currency was incomplete from its inception. This article shows that the incompleteness of the governance architecture of ...Europe’s Economic and Monetary Union (EMU) was both a cause of the euro crisis and a characteristic pattern of the policy responses to the crisis. We develop a “failing forward” argument to explain the dynamics of European integration using recent experience in the eurozone as an illustration: Intergovernmental bargaining leads to incompleteness because it forces states with diverse preferences to settle on lowest common denominator solutions. Incompleteness then unleashes forces that lead to crisis. Member states respond by again agreeing to lowest common denominator solutions, which address the crisis and lead to deeper integration. To date, this sequential cycle of piecemeal reform, followed by policy failure, followed by further reform, has managed to sustain both the European project and the common currency. However, this approach entails clear risks. Economically, the policy failures engendered by this incremental approach to the construction of EMU have been catastrophic for the citizens of many crisis-plagued member states. Politically, the perception that the EU is constantly in crisis and in need of reforms to salvage the union is undermining popular support for European integration.
This paper examines the aftermath of postwar financial crises in advanced countries. We construct a new semiannual series on financial distress in 24 OECD countries for the period 1967-2012. The ...series is based on assessments of the health of countries' financial systems from a consistent, real-time narrative source, and classifies financial distress on a relatively fine scale. We find that the average decline in output following a financial crisis is statistically significant and persistent, but only moderate in size. More important, we find that the average decline is sensitive to the specification and sample, and that the aftermath of crises is highly variable across major episodes. A simple forecasting exercise suggests that one important driver of the variation is the severity and persistence of financial distress itself. At the same time, we find little evidence of nonlinearities in the relationship between financial distress and the aftermaths of crises.
We construct a risk management index (RMI) to measure the strength and independence of the risk management function at bank holding companies (BHCs). The U.S. BHCs with higher RMI before the onset of ...the financial crisis have lower tail risk, lower nonperforming loans, and better operating and stock return performance during the financial crisis years. Over the period 1995 to 2010, BHCs with a higher lagged RMI have lower tail risk and higher return on assets, all else equal. Overall, these results suggest that a strong and independent risk management function can curtail tail risk exposures at banks.
How can we explain the decline in support for the European Union (EU) and the idea of European integration after the onset of the great recession in the fall of 2007? Did the economic crisis and the ...austerity policies that the EU imposed—in tandem with the IMF—on several member countries help cause this drop? While there is some evidence for this direct effect of EU policies, we find that the most significant determinant of trust and support for the EU remains the level of trust in national governments. Based on cue theory and using concepts of diffuse and specific support, we find that support for the EU is derived from evaluations of national politics and policy, which Europeans know far better than the remote political system of the EU. This effect, however, is somewhat muted for those sophisticated Europeans that are more knowledgeable about the EU and are able to form opinions about it independently of the national contexts in which they live. We also find that the recent economic crisis has led to a discernible increase in the number of those who are disillusioned with politics both at the national and the supranational level. We analyze 133 national surveys from 27 EU countries by estimating a series of cross-classified multilevel logistic regression models.
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