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Politicians, central banks, and the shape of financial supervision architectures


  • Lucia Dalla Pellegrina
  • Donato Masciandaro


Purpose - This paper aims to investigate the role of the quality of government on financial supervisory structures in different countries. Design/methodology/approach - The objectives are pursued by means of econometric tools based on probit and multinomial logit techniques. Findings - It is found that the quality of government plays a crucial role in determining supervision unification. “Good” policymakers (helping hand types) prefer a unified financial authority while “bad” ones (grabbing hand type) choose specialized or hybrid models depending on how powerful is the central bank. Research limitations/implications - Research limitations are represented by the endogenous nature of political variables with respect to the supervisory design. Suggestions for future research rely on finding adequate instrumental variables to be included in the empirical analysis in order to address causality issues. Practical implications - The paper follows a positive approach, explaining why different supervisory structures are observed around the world. As a consequence, it does not provide any normative implication. Originality/value - Its original contribution can be identified in the first attempt to include political preferences in determining the choice among different regimes of financial supervision.

Suggested Citation

  • Lucia Dalla Pellegrina & Donato Masciandaro, 2008. "Politicians, central banks, and the shape of financial supervision architectures," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 16(4), pages 290-317, November.
  • Handle: RePEc:eme:jfrcpp:v:16:y:2008:i:4:p:290-317

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    References listed on IDEAS

    1. Casey, Jean Pierre, 2006. "Bond market transparency: To regulate or not to regulate," ECMI Papers 1254, Centre for European Policy Studies.
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    Cited by:

    1. Donato Masciandaro & Marc Quintyn, 2010. "Institutions Matter: Financial Supervision Architecture, Central Bank and Path-Dependence. General Trends and the South Eastern European Countries," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 8(1), pages 7-53.
    2. Richard Brophy, 2012. "Development of insurance regulation in Ireland," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(3), pages 248-263, July.
    3. Lucia Dalla Pellegrina & Donato Masciandaro & Rosaria Vega Pansini, 2011. "New Advantages of Tying One’s Hands: Banking Supervision, Monetary Policy and Central Bank Independence," Chapters,in: Handbook of Central Banking, Financial Regulation and Supervision, chapter 8 Edward Elgar Publishing.
    4. Ovidiu Stoica & Delia-Elena Diaconasu, 2012. "Regional Economic Integration And National Financial Supervision. A Comparative Study," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(14), pages 1-23.
    5. Favaretto, Federico & Masciandaro, Donato, 2016. "Doves, hawks and pigeons: Behavioral monetary policy and interest rate inertia," Journal of Financial Stability, Elsevier, vol. 27(C), pages 50-58.
    6. Donato Masciandaro & Maria J. Nieto & Marc Quintyn, 2011. "Will They Sing the Same Tune? Measuring Convergence in the New European System of Financial Supervisors," Chapters,in: Handbook of Central Banking, Financial Regulation and Supervision, chapter 17 Edward Elgar Publishing.
    7. Donato Masciandaro & Marc Quintyn, 2011. "Regulating the Regulators: The Changing Face of Financial Supervision Architectures Before and After the Financial Crisis," Chapters,in: Handbook of Central Banking, Financial Regulation and Supervision, chapter 16 Edward Elgar Publishing.
    8. Rehman Scheherazade S., 2010. "The Obama Administration and the U.S. Financial Crisis," Global Economy Journal, De Gruyter, vol. 10(1), pages 1-24, February.
    9. Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 415-427.
    10. Ovidiu Stoica & Roxana Scantee, 2012. "Financial Supervision and Banking Competition in European Union," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 8(6), pages 56-66, December.
    11. L. Dalla Pellegrina & D. Masciandaro & R. Pansini, 2014. "Do exchange rate regimes affect the role of central banks as banking supervisors?," European Journal of Law and Economics, Springer, vol. 38(2), pages 279-315, October.
    12. Jakub Gren & David Howarth & Lucia Quaglia, 2015. "Supranational Banking Supervision in Europe: The Construction of a Credible Watchdog," Journal of Common Market Studies, Wiley Blackwell, vol. 53, pages 181-199, September.


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