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Political Economy Origins of Financial Markets in Europe and Asia

Svetlana Andrianova (), Panicos Demetriades () and Chenggang Xu

No 08/1, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

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.

Keywords: Monopoly; politics; institutions; finance (search for similar items in EconPapers)
JEL-codes: G18 N20 O16 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-dev, nep-fmk, nep-his, nep-pke, nep-pol and nep-sea
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Related works:
Journal Article: Political Economy Origins of Financial Markets in Europe and Asia (2011) Downloads
Working Paper: Political Economy Origins of Financial Markets in Europe and Asia (2008) Downloads
Working Paper: Political Economy Origins of Financial Markets in Europe and Asia (2008) Downloads
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