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The Political Economy of Financial Systems

Author

Listed:
  • Stephen Haber

    (Stanford University)

  • Enrico Perotti

    () (University of Amsterdam)

Abstract

This survey reviews the literature on the political economy of financial structure, broadly defined to include the size of capital markets and banking systems as well as the distribution of access to external finance across firms.The theoretical literature on the institutional basis for financial development and the recent evidence suggests that unconstrained political power undermines financial accumulation. Even under limited government, unaccountable institutions lead to regulatory capture, favor connected interests, and undermine finance access and entry. Thus the degree of access to political rights by citizens thus strongly affects their access to finance. Finally, we review the recent literature on the time variation of financial development across democracies during the XX century.

Suggested Citation

  • Stephen Haber & Enrico Perotti, 2008. "The Political Economy of Financial Systems," Tinbergen Institute Discussion Papers 08-045/2, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20080045
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    File URL: http://papers.tinbergen.nl/08045.pdf
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    Cited by:

    1. Yoon Je Cho, 2010. "The Role of State Intervention in the Financial Sector: Crisis Prevention, Containment, and Resolution," Working Papers id:3017, eSocialSciences.
    2. Mícheál O’Keeffe & Alessio Terzi, 2015. "The political economy of financial crisis policy," Working Papers 888, Bruegel.
    3. Pierre Mandon & Clément Mathonnat, 2015. "Forms of Democracies and Financial Development," Working Papers halshs-01196108, HAL.
    4. Pierre Mandon & Clément Mathonnat, 2014. "Forms of Democracies and Financial Development," Working Papers halshs-01084679, HAL.
    5. Raja Almarzoqi & Sami Ben Naceur & Akshay Kotak, 2015. "What Matters for Financial Development and Stability?," IMF Working Papers 15/173, International Monetary Fund.
    6. repec:arp:bmerar:2018:p:43-50 is not listed on IDEAS
    7. Robert Lensink & Aljar Meesters, 2014. "Institutions and Bank Performance: A Stochastic Frontier Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(1), pages 67-92, February.
    8. Pierre MANDON & Clément MATHONNAT, 2015. "Forms of Democracies and Financial Development," Working Papers 201523, CERDI.

    More about this item

    Keywords

    political institution; property rights; investor protection; financial development; access to finance; entry; banking;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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