– this post authored by Manthos Delis, Iftekhar Hasan, and Steven Ongena
The positive relationship between democratic development and economic outcomes is well established. Using three decades of international data, this column identifies a new channel for this effect – the cost of credit to corporations. It also analyses loan pricing in Turkey to reveal a substantial rise in the average cost of lending after the attempted coup d’etat in July 2016. Together, these results highlight how efficiency in loan pricing results in a comparative advantage for firms in democratic countries over those in less democratic or authoritarian countries.