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Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU

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  • Hans Grüner
  • Carsten Hefeker

Abstract

Why do large European banks lobby for monetary union? We show in a game-theoretic model that montary union can trigger a change in the structure of the market for international banking transactions with asymmetric effects on profits: large banks are induced to cooperate internationally and gain from European Monetary Union (EMU), while small banks are likely to lose. Monetary union can be interpreted as a device for large banks to push small banks out of the market for cross-border financial services. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Hans Grüner & Carsten Hefeker, 1996. "Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU," Open Economies Review, Springer, vol. 7(3), pages 183-198, July.
    • Handle: RePEc:kap:openec:v:7:y:1996:i:3:p:183-198
    DOI: 10.1007/BF01886820
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    References listed on IDEAS

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    6. Giovanni, Alberto, 1993. "Central banking in a monetary union: reflections on the proposed statute of the European Central Bank," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 38(1), pages 191-230, June.
    7. L. J. Ruland & J.‐M. Viaene, 1993. "The Political Choice Of The Exchange Rate Regime," Economics and Politics, Wiley Blackwell, vol. 5(3), pages 271-284, November.
    8. Vives, Xavier, 1990. "Banking Competition and European Integration," CEPR Discussion Papers 373, C.E.P.R. Discussion Papers.
    9. Vaubel, Roland, 1990. "Currency Competition and European Monetary Integration," Economic Journal, Royal Economic Society, vol. 100(402), pages 936-946, September.
    10. Bofinger, Peter, 1994. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 915, C.E.P.R. Discussion Papers.
    11. Frieden, Jeffry A., 1991. "Invested interests: the politics of national economic policies in a world of global finance," International Organization, Cambridge University Press, vol. 45(4), pages 425-451, October.
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    Cited by:

    1. Roland Vaubel, 1999. "Enforcing Competition Among Governments: Theory and Application to the European Union," Constitutional Political Economy, Springer, vol. 10(4), pages 327-338, November.
    2. Gruner, Hans Peter, 1997. "A Comparison of Three Institutions for Monetary Policy When Central Bankers Have Private Objectives," Public Choice, Springer, vol. 92(1-2), pages 127-143, July.
    3. H.P. Grãœner & C. Hefeker, 1995. "Domestic pressures and the exchange rate regime: why economically bad decisions are politically popular?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 48(194), pages 331-350.

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    More about this item

    Keywords

    European Monetary Union; interest groups; banking policy; bank cooperation; E5; F3; G2;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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