Credit Shocks and Populism
Do banking crises fuel populism? While scholars identified the economic causes of populism in trade, unemployment, or migration, the evidence on the role of banks is scant. In this paper we aim to fill this gap. We investigate whether lending cuts by banks increase the electoral support for populist parties. To this end, we exploit the impact of an exogenous lending cut by a large German bank in 2007-08 on the voting behaviour of individuals set in counties exposed to the cut. We combine this data with SOEP data on individual voting intentions for populist parties. Based on this strategy, our paper shows new empirical evidence on the causal effect of banking crises on individuals’ political attitudes.