Democratic development and credit: "Democracy doesn't come cheap" But at least credit to its corporations will be

Manthos D. Delis, Iftekhar Hasan and Steven Ongena

No 18/2018, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: Does democratization reduce the cost of credit? Using global syndicated loan data from 1984 to 2014, we find that democratization has a sizeable negative effect on loan spreads: a one-point increase in the zero-to-ten Polity IV index of democracy shaves at least 19 basis points off spreads, but likely more. Reversals to autocracy hike spreads more strongly. Our findings are robust to the comprehensive inclusion of relevant controls, to the instrumentation with regional waves of democratization, and to a battery of other sensitivity tests. We thus highlight the lower cost of loans as one relevant mechanism through which democratization can affect economic development.

JEL-codes: G21 G30 P16 P26 P27 P47 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/212426/1/bof-rdp2018-018.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2018_018

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().