Bank credit and political business cycle
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Abstract
Except the instruments of fiscal and monetary policy the economic literature rarely draws attention to other tools that can serve a political creation of the business cycle. However, it seems that the methods of inducing such phenomenon can be more. The study contains the overview of the latest studies to determine whether this group includes banks as well. The analysis points to the risk that the credit policy conducted by politically manipulated banks may allow to achieve similar effects, as previously known instruments of the cycle creation. Such a mechanism is however more difficult to detect. From the politicians' point of view therefore it may be more profitable. Empirical studies show that greater risk refers to state-owned banks rather to private banks. The study shows that Central and Eastern Europe, including Poland may be exposed to the occurrence of political business cycle caused by stimulated by politicians credit supply.(original abstract)
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