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The Future of Financial Markets and Regulation: What Strategy for Europe?

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  • Jean-Baptiste Gossé

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

  • Dominique Plihon

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article provides insight into the future of financial markets and regulation in order to define what would be the best strategy for Europe. To preserve financial stability, Europe has to choose between financial opening and independently determining how to regulate finance. Among the five scenarios we defined, three achieve financial stability both inside and outside Europe. In terms of market efficiency, the multi-polar scenario is the best and the fragmentation scenario is the worst, since gains of integration depend on the size of the new capital market. Regarding sovereignty of regulation, fragmentation is the best scenario and the multi-polar scenario is the worst because it necessitates coordination at the global level which implies moving further away from respective national preferences. However, the more realistic option seems to be the regionalisation scenario: (i) this level of coordination seems much more realistic than the global one; (ii) the market should be of sufficient size to enjoy substantial benefits of integration. Nevertheless, the "European government" might gradually increase the degree of financial integration outside Europe in line with the degree of cooperation with the rest of the world.

Suggested Citation

  • Jean-Baptiste Gossé & Dominique Plihon, 2011. "The Future of Financial Markets and Regulation: What Strategy for Europe?," Working Papers hal-00613251, HAL.
    • Handle: RePEc:hal:wpaper:hal-00613251
    Note: View the original document on HAL open archive server: https://hal.science/hal-00613251
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    References listed on IDEAS

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    1. Deniz Igan & Prachi Mishra & Thierry Tressel, 2012. "A Fistful of Dollars: Lobbying and the Financial Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 195-230.
    2. Maurice Obstfeld & Kenneth S. Rogoff, 2009. "Global imbalances and the financial crisis: products of common causes," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 131-172.
    3. Paul De Grauwe, 2010. "The Financial Crisis and the Future of the Eurozone," Bruges European Economic Policy Briefings 21, European Economic Studies Department, College of Europe.
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    Keywords

    Financial Stability; Supervision and Regulation; Financial Integration;
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