Working Paper: NBER ID: w9595
Authors: Raghuram Rajan; Luigi Zingales
Abstract: In the last two decades the European financial markets have become more market oriented. We analyze the economic and political forces that have triggered these changes as well as their likely welfare implications. We also try to assess whether this trend will continue. Based on our analysis, we conjecture that even if Europe might benefit from a continuation of the trend, in the near future political support for it is likely to become much weaker. Furthermore, without serious reforms, the trend is likely to benefit Southern Europe less than Northern Europe
Keywords: No keywords provided
JEL Codes: G0; G2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monetary integration at the European level (F36) | expansion of arms-length financing in Europe (F39) |
| financial integration on a global scale (F30) | expansion of arms-length financing in Europe (F39) |
| historical context of European financial systems (N23) | response to the Great Depression (N12) |
| dominance of large banks in Europe (F65) | political coalition favoring interventionist policies (F52) |
| political coalition favoring interventionist policies (F52) | suppression of development of arms-length markets (D47) |
| political and regulatory environment (G38) | effectiveness of arms-length markets (D47) |
| serious structural reforms (E69) | benefits from ongoing trend towards market-oriented finance in southern European countries (P34) |