A Hypothesis on Banking and Democracy: Explaining Changes in Ukraine's Political Regime

Abstract

Analysts have long attempted to explain the patterns of change in the quality of post-Soviet political regimes, but few systematic inquiries exist on the matter. In this thesis, I present a new account of such patterns of change centered on interactions between political groups and banks in Ukraine. Research on Ukrainian has shown that political groups related to banks tend to hold outsized levels of political influence. Drawing on new empirical evidence, including the infamous case of PrivatBank, I find that the situation with political groups and banks in Ukraine appears to be analogous to those described by rentier theories. I argue fluctuations in Ukraine’s political regime may be linked to fluctuations in the number of licensed banks furthering the power of political groups in the country. I test this hypothesis using the GETS statistical modeling approach. The results of the analysis offer initial support for the proposed hypothesis.