Studies of the 2007-09 credit crisis and the resulting recession have revealed the inadequacy of the predominant theoretical frameworks and their failure to propose adequate policy solutions. The presence in the economy of “bank money” and a financial system (not only constituted by banks)...

The present article contains a brief but comprehensive overview of the development of the Capital Markets Union (CMU) project in the EU to further deepen EU capital markets’ integration. After the Introduction, it first discusses the Commission’s 2015 CMU Action Plan and its follow-up,...

A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if the hypothesis holds, then market valuations must follow a random walk. This postulate has frequently been criticized on the basis of empirical evidence. Yet the assertion itself incurs what we...

This paper presents an integrated overview of the literature linking institutions, financial development and economic growth. From the large body of research on institutional development, the paper first selects those contributions that make it possible to study the role of institutional...

The increasing dominance of finance starting in the late 1970s/early 1980s in the US and the UK, and somewhat later in other countries, was associated with two fundamental and structural processes generating the contradictions of this phase of development and finally the financial and economic...

A Capital Markets Union (CMU) is the great hope of European policymakers. The plan for a CMU tries to reduce the reliance of European investors on banks and build up a market-based risk-sharing channel between member states. Our empirical analysis raises doubts that this can be achieved through...

This study investigates the effects of financial deepening on innovation efficiency for various democratic levels of political institutions using panel data from 69 countries spanning 1970-2010. Banking market deepening is associated with increased innovation efficiency only when political...

Integrated capital markets could smooth a large share of country-specific consumption and income fluctuations. Equity capital play an important role in the process. Insolvency regulations are a key factor for stronger equity market integration. Uniform European insolvency regulations are...

We investigate traders’ behaviour in an experimental asset market where uninformed agents cannot be sure about the presence of insiders. In this framework we compare two trading institutions: the continuous double auction and the call market. The purpose of this comparison is to test which of...

I develop a framework of the buildup and outbreak of financial crises in an asymmetric information setting. In equilibrium, two distinct economic states arise endogenously: "normal times", periods of modest investment, and "booms", periods of expansionary investment. Normal times occur when the...