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

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  • Grüner, Hans Peter
  • Hefeker, Carsten

Abstract

Why do large European banks lobby for monetary union? We show in a game-theoretic model that monetary 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 Monetaiy 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.

Suggested Citation

  • Grüner, Hans Peter & Hefeker, Carsten, 1994. "Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU," Discussion Papers, Series II 238, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:238
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    References listed on IDEAS

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    1. Barry Eichengreen & Jeffry Frieden, 1993. "The Political Economy Of European Monetary Unification: An Analytical Introduction," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 85-104, July.
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    6. Bofinger, Peter, 1994. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 915, C.E.P.R. Discussion Papers.
    7. 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.
    8. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
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    10. Casella, Alessandra, 1992. "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity," American Economic Review, American Economic Association, vol. 82(2), pages 115-121, May.
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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 Monetaiy Union; Interest Groups; Banking Policy; Bank Cooperation;
    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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