There were no statistically significant differences between how democracies and autocracies handled the Latin American debt crisis of the 1980s. Furthermore, new Latin American democracies performed just as well as autocracies in this crisis despite being less established and having higher debt burdens than their autocratic peers.

Wesleyan University

The more veto players in a given political system, the more credibility that a government gains. If a policy has resulted from complex negotiations, then citizens can have more confidence that the government will actually stick to its economic policies, inducing citizens and markets to cooperate with the government. Furthermore, an executive with many checks on their power is inhibited in making rash economic decisions that may upend the market, whereas autocracies have no such constraints.

Why Democracies Handle Economic Crises Better Than Autocracies (Theory)

Remmer, K. L. (1990). Democracy and economic crisis: the Latin American experience. World Politics: A Quarterly Journal of International Relations, 42(3), 315-335. https://doi.org/10.2307/2010414

Remmer (1990)

Example: Democracies and the Latin American Debt Crisis (1980s)

Autocratic Asian governments suffered numerous disadvantages during the financial crisis of the late 1990s. Chief executives engaged in arbitrary policy-making and autocracies were fraught with political instability regarding succession crises. Democracies such as South Korea, by contrast, were able to institute comprehensive policies that enabled speedy economic recovery.

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