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Political economy origins of financial markets in Europe and Asia

By Svetlana Andrianova, Panicos O. Demetriades and Chenggang Xu


This paper contributes to the finance-growth literature by\ud examining the political economy origins of some of the most successful\ud financial markets in Europe and Asia. It provides historical evidence from\ud London, Amsterdam and Hong Kong that highlights the essential role\ud played by the government sector in kick-starting financial development.\ud We show that the emergence of financial systems did not occur through\ud laissez-faire approaches and that secure property rights alone were not\ud sufficient for financial development. In the cases of London and Amsterdam,\ud governments created large trade monopolies which were responsible\ud for all the major financial innovations of the time. In the case of Hong\ud Kong, where the financial developmentmodel was bank-based, large banking\ud monopolies with close links to the state were created. We argue that\ud the three examples are not special cases and the role of government in the\ud early stages of financial development has been widespread world-wide

Topics: Monopoly, politics, institutions, finance
Publisher: Sage
Year: 2008
DOI identifier: 10.1016/j.worlddev.2010.10.001
OAI identifier: oai:lra.le.ac.uk:2381/7475

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