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Political Economy Origins of Financial Markets in Europe and Asia

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  • Svetlana Andrianova

    ()

  • Panicos Demetriades

    ()

  • Chenggang Xu

    ()

Abstract

This paper contributes to the finance-growth literature by examining the political economy origins of some of the most successful financial markets in Europe and Asia. It provides historical evidence from London, Amsterdam and Hong Kong that highlights the essential role played by the government sector in kick-starting financial development. We show that the emergence of financial systems did not occur through laissez-faire approaches and that secure property rights alone were not sufficient for financial development. In the cases of London and Amsterdam, governments created large trade monopolies which were responsible for all the major financial innovations of the time. In the case of Hong Kong, where the financial developmentmodel was bank-based, large banking monopolies with close links to the state were created. We argue that the three examples are not special cases and the role of government in the early stages of financial development has been widespread world-wide.

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Bibliographic Info

Paper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 08-01.

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Length: 41 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:edb:cedidp:08-01

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  1. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2003. "The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth," CEPR Discussion Papers 3712, C.E.P.R. Discussion Papers.
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  7. Svetlana Andrianova & Panicos Demetriades & Anja Shortland, 2002. "Government Ownership of Banks, Institutions, and Financial Development," Discussion Papers in Economics 02/13, Department of Economics, University of Leicester, revised Aug 2006.
  8. Raghuram G. Rajan & Luigi Zingales, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," CRSP working papers 526, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  9. Michael D. Bordo & Peter L. Rousseau, 2006. "Legal-Political Factors and the Historical Evolution of the Finance-Growth Link," Working Papers 107, Oesterreichische Nationalbank (Austrian Central Bank).
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  13. Charles Goodhart, 1988. "The Evolution of Central Banks," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570734.
  14. Demetriades, Panicos O. & Luintel, Kul B., 2001. "Financial restraints in the South Korean miracle," Journal of Development Economics, Elsevier, vol. 64(2), pages 459-479, April.
  15. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," CEPR Discussion Papers 4458, C.E.P.R. Discussion Papers.
  16. Michele Fratianni & Franco Spinelli, 2007. "Did Genoa and Venice Kick a Financial Revolution in the Quattrocento?," Working Papers 112, Oesterreichische Nationalbank (Austrian Central Bank).
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Cited by:
  1. Zuzana Fungáčová & Jan Hanousek, 2011. "Determinants Of Firm Delisting On The Prague Stock Exchange," Prague Economic Papers, University of Economics, Prague, vol. 2011(4), pages 348-365.
  2. Xu, Cheng-Gang, 2010. "The Institutional Foundations of China’s Reforms and Development," CEPR Discussion Papers 7654, C.E.P.R. Discussion Papers.

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