Does democracy die in recessions? A descriptive analysis of aggregate demand shortfalls and regime transition

Abstract

Can a central bank accidentally provoke changes to a country's political regime? Sumner (2015) proposes that macroeconomic mismanagement on the part of central bank authorities, leading to declines in nominal output, can cause voters to respond with populism at the ballot box. Murphy and Smith (2018) have found evidence for this hypothesis, with populism interpreted as movements away from liberal market institutions. This article extends the hypothesis to macroeconomic mismanagement and its relationship with democratic political institutions. It finds both that recessions foreshadow a lower probability of a dictatorship becoming a democracy, and that a democracy is more likely to become a dictatorship. The relationship with autocratisation is most visible after 15 years, while the negative relationship with democratisation is far more persistent over time. These findings, it must be stressed, are historical and descriptive, not necessarily causal. K E Y W O R D S autocracy, behavioural political economy, democracy, democratisation, market monetarism J E L C L A S S I F I C A T I O N D72; P16; E30

Did Austerity Cause Brexit?

“…Throughout the paper, standard errors are clustered at the district level (constituency level for the Westminster election analysis). 16 I focus on four main characteristics X i,baseline that stand out due to their prominence in the cross-sectional analysis of the Leave vote and their relevance to the wider literature: the share of the 2001 resident population with no formal qualifications, the share working in routine jobs, and the working-age resident population shares working in the manufacturing and retail sectors. 17…”