Historically, the development of the financial sector has been an indispensable driver of economic growth. In the aftermath of the Great Recession, there is a pressing need to reassess the role of the financial sector in the determination of economic growth. Using a dynamic panel framework, our analysis covers 34 European and Commonwealth of Independent States economies for the period 1998–2014 and controls for the role of macroeconomic and institutional variables. Our evidence suggests that the potential benefits of the financial sector finance may have dramatically reversed in recent years, resulting in “un‐creative destruction.” The results suggest, tentatively, that there has been a severance of the link between the financial sector and the real economy. The results, however, vary according to the level of economic development across the European and Commonwealth of Independent States economies. In the case of developing market economies, the financial intermediation proxies are not significant in explaining economic growth. The effect of changes in investment expenditure, the money supply, wages, unit labour costs, and trade openness is found to be strong and in line with a priori expectations across all country samples. Notably, government consumption is also found to be a significant driver of economic growth, except in the developing market economies in the period following the Great Recession. In line with the growing consensus in other research areas, we provide evidence of a robust role for the institutional framework proxied by the quality of governance in determining economic development.

Between the first quarters of 1970 and 1980 the average price of new houses in the United Kingdom increased five-fold. Over the same period building societies grew to become major financial institutions, attracting almost 50 per cent of the personal sector's holdings of liquid assets, and responsible for more than 85 per cent of house purchase finance. This paper sets out to examine the extent to which building societies have been responsible for the rapid acceleration of house prices and indicates the other main determinants of this phenomenon. The analysis is extended to a discussion of recent econometric research into house price determination and arrives at a more general specification, employing an error-correction estimation methodology.

Completion of the European Single Market Programme in FinancialServices has, as expected, set in motion a rationalisation process within the European banking industry, as banks respond to increasing competitive pressures that are having a dampening effect on their traditional business margins. Assesses the importance of these developments in the context of the policy options that are open to the European banking community in the new millennium. In particular, given the prospect of an integrated European economy, now commonly referred to as Euroland, the paper addresses, as its central theme, the potential for the development of pan-European banks that would then be in a position to configure longer-term globalisation strategies. Evolution in this direction, if it occurs, is important from a European Central Bank policy perspective, since it would raise systemic risk issues if a small number of European licensed banks became``too big to fail''. We conclude, however, that the most prominent strategic response is likely to be based on the European``regionalisation'' of banks and markets rather than pan-Europeanisation.

No abstract

No abstract