Government Turnover and External Financial Assistance

We study the political incentives shaping governments’ decisions to seek assistance from a lender of last resort. We propose that re-elected incumbents are more reluctant than newly elected governments to request assistance, as this action reveals negative information about their past performance...

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Autores principales: Gago, Andrés, Abad, José María, Bermejo, Vicente J., Carozzi, Felipe
Formato: Artículo submittedVersion
Lenguaje:Inglés
Publicado: Universidad Torcuato Di Tella 2023
Materias:
Political incentives
Governments decisions
Financing program
Fondo Monetario Internacional
Government Turnover
Bailout
Fiscal Consolidation
G31
G32
Acceso en línea:https://repositorio.utdt.edu/handle/20.500.13098/11989
Aporte de:
Repositorio Digital Universidad Torcuato Di Tella de Universidad Torcuato Di Tella
id I57-R163-20.500.13098-11989
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spelling I57-R163-20.500.13098-119892023-08-12T07:00:18Z Government Turnover and External Financial Assistance Gago, Andrés Abad, José María Bermejo, Vicente J. Carozzi, Felipe Political incentives Governments decisions Financing program Fondo Monetario Internacional Government Turnover Bailout Fiscal Consolidation G31 G32 We study the political incentives shaping governments’ decisions to seek assistance from a lender of last resort. We propose that re-elected incumbents are more reluctant than newly elected governments to request assistance, as this action reveals negative information about their past performance. We first provide cross-country descriptive evidence that a change in office is indeed associated with a larger probability of receiving assistance from the IMF. Next, to obtain causal evidence, we analyze the decisions made by 4,000 Spanish municipalities following a credit shock during the Great Recession. Regression-discontinuity estimates showthat newly elected local executiveswere approximately 30 percentage points more likely than re-elected incumbents to publicly agree on a financing program with the national government. Using data from press reports, electoral results and a survey on politicians’ views, we show that many re-elected incumbents avoided requesting a public bailout to protect their image, even though this decision was financially suboptimal. 2023-08-11T16:02:09Z 2023-08-11T16:02:09Z 2023 info:eu-repo/semantics/article info:eu-repo/semantics/submittedVersion https://repositorio.utdt.edu/handle/20.500.13098/11989 eng info:eu-repo/semantics/openAccess https://creativecommons.org/licenses/by-sa/2.5/ar/ 64 p. application/pdf application/pdf Universidad Torcuato Di Tella
institution Universidad Torcuato Di Tella
institution_str I-57
repository_str R-163
collection Repositorio Digital Universidad Torcuato Di Tella
language Inglés
orig_language_str_mv eng
topic Political incentives
Governments decisions
Financing program
Fondo Monetario Internacional
Government Turnover
Bailout
Fiscal Consolidation
G31
G32
spellingShingle Political incentives
Governments decisions
Financing program
Fondo Monetario Internacional
Government Turnover
Bailout
Fiscal Consolidation
G31
G32
Gago, Andrés
Abad, José María
Bermejo, Vicente J.
Carozzi, Felipe
Government Turnover and External Financial Assistance
topic_facet Political incentives
Governments decisions
Financing program
Fondo Monetario Internacional
Government Turnover
Bailout
Fiscal Consolidation
G31
G32
description We study the political incentives shaping governments’ decisions to seek assistance from a lender of last resort. We propose that re-elected incumbents are more reluctant than newly elected governments to request assistance, as this action reveals negative information about their past performance. We first provide cross-country descriptive evidence that a change in office is indeed associated with a larger probability of receiving assistance from the IMF. Next, to obtain causal evidence, we analyze the decisions made by 4,000 Spanish municipalities following a credit shock during the Great Recession. Regression-discontinuity estimates showthat newly elected local executiveswere approximately 30 percentage points more likely than re-elected incumbents to publicly agree on a financing program with the national government. Using data from press reports, electoral results and a survey on politicians’ views, we show that many re-elected incumbents avoided requesting a public bailout to protect their image, even though this decision was financially suboptimal.
format Artículo
submittedVersion
author Gago, Andrés
Abad, José María
Bermejo, Vicente J.
Carozzi, Felipe
author_facet Gago, Andrés
Abad, José María
Bermejo, Vicente J.
Carozzi, Felipe
author_sort Gago, Andrés
title Government Turnover and External Financial Assistance
title_short Government Turnover and External Financial Assistance
title_full Government Turnover and External Financial Assistance
title_fullStr Government Turnover and External Financial Assistance
title_full_unstemmed Government Turnover and External Financial Assistance
title_sort government turnover and external financial assistance
publisher Universidad Torcuato Di Tella
publishDate 2023
url https://repositorio.utdt.edu/handle/20.500.13098/11989
work_keys_str_mv AT gagoandres governmentturnoverandexternalfinancialassistance
AT abadjosemaria governmentturnoverandexternalfinancialassistance
AT bermejovicentej governmentturnoverandexternalfinancialassistance
AT carozzifelipe governmentturnoverandexternalfinancialassistance
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