Financial market governance and the Euro‐Mediterranean Partnership

Financial market governance and the Euro‐Mediterranean Partnership Purpose – In recent years, Mediterranean Partner countries (MPCs) have been ambitious about reforming their banking and financial systems. Former state‐owned banks have been privatised, and restrictions for international capital flows have been lowered to accelerate investment activities and spur regional economic growth. The purpose of this paper is to evaluate these latest developments against the backdrop of the state‐of‐the‐art literature and derive implications for a reformed institutional setting for sound financial market governance in the Mediterranean region. Design/methodology/approach – Building on recent empirical literature on the relationship between financial development, financial governance, and economic growth, this paper empirically assesses the validity of the so‐called finance‐growth nexus for Mediterranean Partner countries. Findings – The findings indicate that the current institutional set‐up renders an efficient allocation of savings impossible, and thus represents a strong binding constraint on economic growth. In this regard, it is found that adverse financial governance practices have substantially contributed to this outcome. Practical implications – This paper argues for upgrading domestic regulatory frameworks before continuing a sequential integration and liberalisation process. Originality/value – It is thought that this attempt is unique in explicitly formulating a comprehensive role for the Euro‐Mediterranean Partnership (EMP) in assisting MPCs on financial governance issues. In this respect, it identifies prevailing incentive schemes for regional actors and opportunities for the EU to actively support the implementation of a reform agenda for financial institutions in the EMP framework. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png EuroMed Journal of Business Emerald Publishing

Financial market governance and the Euro‐Mediterranean Partnership

EuroMed Journal of Business, Volume 6 (2): 19 – Jul 18, 2011

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1450-2194
DOI
10.1108/14502191111151296
Publisher site
See Article on Publisher Site

Abstract

Purpose – In recent years, Mediterranean Partner countries (MPCs) have been ambitious about reforming their banking and financial systems. Former state‐owned banks have been privatised, and restrictions for international capital flows have been lowered to accelerate investment activities and spur regional economic growth. The purpose of this paper is to evaluate these latest developments against the backdrop of the state‐of‐the‐art literature and derive implications for a reformed institutional setting for sound financial market governance in the Mediterranean region. Design/methodology/approach – Building on recent empirical literature on the relationship between financial development, financial governance, and economic growth, this paper empirically assesses the validity of the so‐called finance‐growth nexus for Mediterranean Partner countries. Findings – The findings indicate that the current institutional set‐up renders an efficient allocation of savings impossible, and thus represents a strong binding constraint on economic growth. In this regard, it is found that adverse financial governance practices have substantially contributed to this outcome. Practical implications – This paper argues for upgrading domestic regulatory frameworks before continuing a sequential integration and liberalisation process. Originality/value – It is thought that this attempt is unique in explicitly formulating a comprehensive role for the Euro‐Mediterranean Partnership (EMP) in assisting MPCs on financial governance issues. In this respect, it identifies prevailing incentive schemes for regional actors and opportunities for the EU to actively support the implementation of a reform agenda for financial institutions in the EMP framework.

Journal

EuroMed Journal of BusinessEmerald Publishing

Published: Jul 18, 2011

Keywords: Euro‐Mediterranean Partnership; Financial governance; Economic development; Economic growth; Incentive schemes; Europe

References

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