Keefer, Philip2013-06-262013-06-262004-10https://hdl.handle.net/10986/14204The author proposes a new approach to explain why the costs of crisis are greater in some countries than in others. He begins with the premise that many crises result from the willingness of politicians to cater to special interests, at the expense of broad social interests. A parsimonious model predicts that the less costly it is for average citizens to expel politicians, the more veto players there are; the less important are exogenous shocks, and the more difficult it is for politicians and special interests to forge credible agreements, the lower the costs of crisis are. Though these predictions differ from those in the literature, empirical evidence presented shows that they explain the fiscal costs of financial crisis, even after controlling for the financial sector policies believed to contribute most to the efficient prevention, and resolution of financial crisis.en-USCC BY 3.0 IGOACCOUNTABILITYAGRICULTUREAMBITIONBAILOUT COSTSBANK ASSETSBANK DEPOSITSBANK FAILURESBANK INSOLVENCYBANK LIABILITIESBANK RUNBANK SIZEBANKING CRISESBANKING DEPOSITSBANKING OPERATIONSBANKING SECTORBANKING SYSTEMBANKSCAMPAIGN CONTRIBUTIONSCAPITAL FLOWSCHECKSCITIZENSCOMPETITIVENESSCONSTITUENCIESCORRUPTIONCURRENCYCURRENT ACCOUNTDEBTDECISION MAKINGDEMOCRACIESDEMOCRATIC COUNTRIESDEPOSIT INSURANCEDEVALUATIONDISCOUNT RATESDISTRICTSECONOMIC PERFORMANCEECONOMIC SECTORSECONOMIC SHOCKSELECTIONSEMPIRICAL EVIDENCEEXOGENOUS SHOCKSFINANCIAL CRISESFINANCIAL CRISISFINANCIAL INSTITUTIONSFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL SYSTEMFISCAL POLICIESFOREIGN EXCHANGEGDPGOVERNMENT OFFICIALSGOVERNMENT SPENDINGILLIQUIDITYINDEBTEDNESSINSURANCEJURISDICTIONSLEGISLATIONLEGISLATIVE DECISIONSLEGISLATORSLEGISLATURELENDING PRACTICESLIQUIDITYLOBBYINGLOBBYISTSNATIONAL INCOMEOFFSETTINGPARLIAMENTARY SYSTEMSPOLICY IMPLEMENTATIONPOLITICAL INSTITUTIONSPOLITICIANSPRESIDENTSPUBLIC SPENDINGREAL INTEREST RATERECAPITALIZATIONREGULATORY POLICYREPRESENTATIVESSAVINGSSEPARATION OF POWERSSMALL BANKSSOCIAL GROUPSTERMS OF TRADEVETOVETO POWERVOTERSWorld Bank10.1596/1813-9450-3439