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Volkswirtschaft - Open Access LMU - Teil 03/03 Podcast
Electoral cycles in savings bank lending

Electoral cycles in savings bank lending

Volkswirtschaft - Open Access LMU - Teil 03/03 vor 12 Jahren

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We provide causal evidence that German savings banks – where local
politicians are by law involved in their management –
systematically adjust lending policies in response to local
electoral cycles. The different timing of county elections across
states and the existence of a control group of cooperative banks –
that are very similar to savings banks but lack their political
connectedness – allow for clean identification of causal effects of
county elections on savings banks’ lending. These effects are
economically meaningful and robust to various specifications.
Moreover, politically induced lending increases in incumbent party
entrenchment and in the contestedness of upcoming elections.