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Financial liberalization as a process of flawed institutional change


  • Faruk Ülgen

    () (CREG - Centre de recherche en économie de Grenoble - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes)


I argue that the financial liberalization of the last decades, which resulted in a worldwide crisis, relied on an institutional change that ill-shaped actors’ behavior so as to let them enter into unsustainable speculative activities at the expense of macro-stability. To support such an assertion, I draw upon a specific Veblen-Minsky approach to a credit-money economy and its endogenous fragilities. I also maintain that, when financial markets are liberalized and private-interests related self-regulation replaces public macro-prudential supervision, the financial system undergoes institutional deadlock and the ensuing confusion is transformed into a market gridlock. Markets then become unable to recover without public rescue operations of banks. The subsequent negative economic and social consequences are beyond the limits of any acceptable liberal ideology and scientific understanding. Therefore, systemic stability calls for a tighter macro-regulatory framework to remove the domination of speculative finance over economic decisions and activities.

Suggested Citation

  • Faruk Ülgen, 2016. "Financial liberalization as a process of flawed institutional change," Post-Print halshs-01344502, HAL.
  • Handle: RePEc:hal:journl:halshs-01344502
    DOI: 10.1080/00213624.2016.1179055
    Note: View the original document on HAL open archive server:

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