Evolution of the financial sector – three different stages: repression, development and financialisation

Abstract

EEv vo ol lu ut ti io on n o of f t th he e f fi in na an nc ci ia al l s se ec ct to or r --t th hr re ee e d di if ff fe er re en nt t s st ta ag ge es s: : R Re ep pr re es ss si io on n, , d de ev ve el lo op pm me en nt t a an nd d f fi in na an nc ci ia al li is sa at ti io on n E Ev vo ol lu ut ti io on n o of f t th he e f fi in na an nc ci ia al l s se ec ct to or r --t th hr re ee e d di if ff fe er re en nt t s st ta ag ge es s: : R Re ep pr re es ss si io on n, , d de ev ve el lo op pm me en nt t a an nd d f fi in na an nc ci ia al li is sa at ti io on n _ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ABSTRACTThis paper makes a systematic literature review on the evolution of the financial sector in the last decades all over the world, but especially in the more developed countries. This evolution was marked by three different stages, reflecting different impacts of the financial sector on the real economy and on society. The first stage -financial repression -is characterised by the existence of several regulations and restrictions on the financial sector, which proved to be detrimental to support economic growth. This legitimised the financial liberalisation and deregulation of the financial sector in the recent years, representing the second stage -financial development. Consequently, there was a strong growth of the financial sector in subsequent years, originating an excessive financial deepening and casting doubts around the advantages provided by the financial sector. In fact, excessive financial deepening weakened or reversed the relationship between savings and investments. The large growth of the financial sector and its deleterious effects are commonly referred as financialisation, constituting the third stage. The paper concludes that it is necessary to engage in a fourth stage in the coming years -definancialisation -in order to re-establish a more supportive relationship between the financial sector and economic growth and presents several policy recommendations around this matter.

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Drivers of private consumption in the era of financialisation: new evidence for the European Union countries

“…Against this backdrop, scholars on financialisation have claimed that the emergence of this phenomenon has had profound effects on households' consumption since the mid-1980s due to their higher engagement in the realm of financial markets either as debtors (especially through credit) and/or asset holders (housing, pensions, insurance, money market funds and other financial assets) (Stockhammer, 2010;Lapavitsas, 2011;Barradas, 2016).…”

Finance-growth nexus in the age of financialisation: An empirical reassessment for the European Union countries

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