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Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU

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  • Hans Grüner
  • Carsten Hefeker

Abstract

Why do large European banks lobby for monetary union? We show in a game-theoretic model that montary union can trigger a change in the structure of the market for international banking transactions with asymmetric effects on profits: large banks are induced to cooperate internationally and gain from European Monetary Union (EMU), while small banks are likely to lose. Monetary union can be interpreted as a device for large banks to push small banks out of the market for cross-border financial services. Copyright Kluwer Academic Publishers 1996

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  • Hans Grüner & Carsten Hefeker, 1996. "Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU," Open Economies Review, Springer, vol. 7(3), pages 183-198, July.
    • Handle: RePEc:kap:openec:v:7:y:1996:i:3:p:183-198
    DOI: 10.1007/BF01886820
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    References listed on IDEAS

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    7. L. J. Ruland & J.‐M. Viaene, 1993. "The Political Choice Of The Exchange Rate Regime," Economics and Politics, Wiley Blackwell, vol. 5(3), pages 271-284, November.
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    10. Bofinger, Peter, 1994. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 915, C.E.P.R. Discussion Papers.
    11. Frieden, Jeffry A., 1991. "Invested interests: the politics of national economic policies in a world of global finance," International Organization, Cambridge University Press, vol. 45(4), pages 425-451, October.
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    Cited by:

    1. H.P. Grãœner & C. Hefeker, 1995. "Domestic pressures and the exchange rate regime: why economically bad decisions are politically popular?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 48(194), pages 331-350.
    2. Roland Vaubel, 1999. "Enforcing Competition Among Governments: Theory and Application to the European Union," Constitutional Political Economy, Springer, vol. 10(4), pages 327-338, November.
    3. Gruner, Hans Peter, 1997. "A Comparison of Three Institutions for Monetary Policy When Central Bankers Have Private Objectives," Public Choice, Springer, vol. 92(1-2), pages 127-143, July.

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    More about this item

    Keywords

    European Monetary Union; interest groups; banking policy; bank cooperation; E5; F3; G2;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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