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Political Economy Origins of Financial Markets in Europe and Asia

Author

Listed:
  • Svetlana Andrianova

    (University of Leicester)

  • Panicaos Demetriades

    (University of Leicester)

  • Chenggang Xu

    (London School of Economics)

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

Suggested Citation

  • Svetlana Andrianova & Panicaos Demetriades & Chenggang Xu, 2008. "Political Economy Origins of Financial Markets in Europe and Asia," WEF Working Papers 0034, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    • Handle: RePEc:wef:wpaper:0034
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    References listed on IDEAS

    as
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    Cited by:

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    3. Jiménez Sotelo, Renzo, 2023. "The influence of domestic public debt market in the financial development: evidence of 52 countries in 1990-2020," MPRA Paper 121021, University Library of Munich, Germany.
    4. Jean-Pierre Allegret & Sana Azzabi, 2014. "Intégration financière internationale et croissance économique dans les pays émergents et en développement : le canal du développement financier," Revue d’économie du développement, De Boeck Université, vol. 22(3), pages 27-68.
    5. Awad, Atif & Albaity, Mohamed, 2022. "ICT and economic growth in Sub-Saharan Africa: Transmission channels and effects," Telecommunications Policy, Elsevier, vol. 46(8).
    6. Mushtaq, Rizwan & Bruneau, Catherine, 2019. "Microfinance, financial inclusion and ICT: Implications for poverty and inequality," Technology in Society, Elsevier, vol. 59(C).
    7. Matías Vernengo, 2018. "Classical Political Economy and the Evolution of Central Banks: Endogenous Money and the Fiscal-Military State," Review of Radical Political Economics, Union for Radical Political Economics, vol. 50(4), pages 660-667, December.
    8. Xu, Cheng-Gang, 2010. "The Institutional Foundations of China?s Reforms and Development," CEPR Discussion Papers 7654, C.E.P.R. Discussion Papers.
    9. Qamar ABBAS & Muhammad RAMZAN & Sumbal FATIMA, 2022. "Financial development and public debt. Estimating the role of institutional quality," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(632), A), pages 5-26, Autumn.
    10. Jingyan Fu & Artie W. Ng, 2021. "Scaling up Renewable Energy Assets: Issuing Green Bond via Structured Public-Private Collaboration for Managing Risk in an Emerging Economy," Energies, MDPI, vol. 14(11), pages 1-16, May.
    11. Zuzana Fungáčová & Jan Hanousek, 2011. "Determinants of Firm Delisting on the Prague Stock Exchange," Prague Economic Papers, Prague University of Economics and Business, vol. 2011(4), pages 348-365.
    12. Susan Johnson & Richard Williams, 2016. "The political economy of financial inclusion: tailoring donor policy to fit," Development Policy Review, Overseas Development Institute, vol. 34(5), pages 721-743, September.

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    More about this item

    Keywords

    Monopoly; politics; institutions; finance;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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