” ‘There is surprising little evidence that populists are bad for markets,’ Schularick told the event organized by the European Association for Banking and Financial History, and Allianz Global Investors. ‘The contrary seems often to be the case.’ ”
“Schularick defines populists as charismatic, confrontational politicians who claim to speak for “the people” against the elites, often pursuing protectionist and nationalist policies. His study shows that bond yields fell a median of 12.7 percent 2 years after such individuals took power. Five years later, stocks gained a median of 45 percent, while sovereign ratings usually improved and currencies appreciated.”
“These findings go against the received wisdom of economists, identified by Rudiger Dornbusch and Sebastian Edwards in their 1991 essay on ‘The Macroeconomics of Populism:’ ‘Populist policies do ultimately fail; and when they fail it is always at a frightening cost to the very groups that were supposed to be favored.’ ”
“Schularick suggests some reasons for the unlikely success of populist policies: anti-establishment insurgents usually come to power after a crisis, and thus enjoy the fruits from an overdue upswing; protectionism, competitive devaluations and public spending often prove a boon for national companies, boosting the local stock market; and some of their policies, like public investment in a downturn, just work.”
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