Political Economy Origins of Financial Markets in Europe and Asia

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Political Economy Origins of Financial Markets in Europe and Asia

Author Info

Svetlana Andrianova ()
Panicos Demetriades ()
Chenggang Xu ()

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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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Publisher 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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Paper
- Svetlana Andrianova & Panicos Demetriades & Chenggang Xu, 2008. "Political Economy Origins of Financial Markets in Europe and Asia," Discussion Papers in Economics 08/1, Department of Economics, University of Leicester. [Downloadable!]
- Svetlana Andrianova & Panicaos Demetriades & Chenggang Xu, 2008. "Political Economy Origins of Financial Markets in Europe and Asia," WEF Working Papers 0034, ESRC World Economy and Finance Research Programme, Birkbeck, University of London. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-02-02 (All new papers)
NEP-HIS-2008-02-02 (Business, Economic & Financial History)
NEP-PKE-2008-02-02 (Post Keynesian Economics)
NEP-POL-2008-02-02 (Positive Political Economics)
NEP-SEA-2008-02-02 (South East Asia)

References listed on IDEAS
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Other versions:
- Rajan, Raghuram G & Zingales, Luigi, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," CEPR Discussion Papers 2783, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Other versions:
- Panicos O Demetriades & Kul B Luintel, 2000. "Financial Restraints in the South Korean Miracle," Discussion Papers in Economics 00/5, Department of Economics, University of Leicester. [Downloadable!]
Svetlana Andrianova & Panicos Demetriades & Anja Shortland, 2006. "Government Ownership of Banks, Institutions, and Financial Development," WEF Working Papers 0011, ESRC World Economy and Finance Research Programme, Birkbeck, University of London. [Downloadable!]
Other versions:
- 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. [Downloadable!]
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Other versions:
- Peter L. Rousseau, 2003. "Historical perspectives on financial development and economic growth," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 81-106. [Downloadable!]
Michele Fratianni & Franco Spinelli, 2006. "Did Genoa and Venice Kick a Financial Revolution in the Quattrocento?," Working Papers 112, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
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