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Political economy origins of financial markets in Europe and Asia

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posted on 04.02.2010, 16:30 by Svetlana Andrianova, Panicos O. Demetriades, Chenggang Xu
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.

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Citation

World Development, 2011, 39 (5), pp. 686-699

Published in

World Development

Publisher

Dept. of Economics, University of Leicester;Sage

issn

0305-750X

Copyright date

2011

Available date

04/02/2010

Publisher version

http://www.le.ac.uk/economics/research/discussion/papers2008.html http://www.sciencedirect.com/science/article/pii/S0305750X10001890

Book series

Papers in Economics;08/1

Language

en

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