A paradox of openness: Democracies, financial integration & crisisA paradox of openness: Democracies, financial integration & crisisD. Case-Ruchala

Why do democracies experience financial crises more often than non-democracies? Revisiting the 2008 Great Financial Crisis (GFC) as a significant and informative test case, I argue that considering the way domestic institutions inhere in system-level structures is important to explaining crisis susceptibility among democracies since the turn of the twenty-first century. I introduce the mechanism of co-regime financial connections in showing that regime type is an important systematic feature of global financial flows. Employing a latent space network regression model using IMF Coordinated Portfolio Investment Survey (CPIS), I find that the network of cross-border portfolio asset investments is systematically patterned by co-democracy pairs. I then show that this regime-patterned interdependence affects increased financial crisis susceptibility among democracies. My findings build on literature highlighting the interdependence between domestic- and system-level factors and inform an empirical puzzle regarding the prevalence of financial crises among democracies.