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Exchange Organizations: Thoughts and Reflections Read chapter Read first chapter

2017 | OriginalPaper | Chapter

11. Exchanges: Link to the Real Economy

Author : Michael Heise

Published in: Equity Markets in Transition

Publisher: Springer International Publishing

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Abstract

As reflected in a book by the British economic historian Niall Ferguson [1], the story behind the ascent and decline of nations can also be told as a story of their stock exchanges and financial markets. As competing nations went head to head in the battle for power, the ability to finance wars and buy influence proved to be hugely important: access to capital markets and financial innovations were a key strategic advantage for kings and rulers alike.

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Footnotes
1
In 1695 the Scottish Parliament founded the Company of Scotland Trading to Africa and the Indies and Scots invested £400,000 in the new-founded company which aimed to establish a colony in the area of today’s Panama. About 1200 people set off to Panama in 1698 but only a quarter returned. The failed adventure wiped out capital equal to half the gross domestic product of Scotland at that time. The French colonial ambition of that day culminated in the Mississippi Bubble which will be discussed in Sect. 11.4.
 
2
All figures quoted from Deutsches Aktieninstitut (DAI, 2015).
 
3
However, for developed markets the relationship between financial development and growth seems to be more nuanced. Beyond a certain threshold, even more credit by banks can be detrimental to economic growth [3].
 
Literature
1.
Ferguson, N. (2008). The ascent of money: A financial history of the world. New York, NY: Penguin.
2.
Levine, Ross. “Finance, long-run growth, and economic opportunity.” VOX (October 25, 2011). Accessed on May 28, 2015.
3.
OECD (2015), Finance and inclusive growth, OECD Economic Policy Paper No.14, OECD 2015.
4.
Levine, Ross. “Finance and growth: theory and evidence.” Handbook of economic growth 1 (2005): 865–934.
5.
Deutsche Bank Research. Corporate funding in Europe: Bonds replacing loans? Accessed on May 28, 2015.
6.
Kindleberger, C. P. M. (1978). Panics, and Crashes: A History of Financial Crises. New York, NY: Palgrave Macmillan.
7.
Fama, Eugene F. “Interview with Eugene Fama.” The Region (2007): 15–22.
8.
Borio, Claudio, and Haibin Zhu. “Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?.” Journal of Financial Stability 8.4 (2012): 236–251.
9.
Cecchetti, S. G., & Kharroubi, E. (2013). Why does financial sector growth crowd out real economic growth?. Bank for International Settlements Working Papers No 490.
10.
Bernanke, B., & Gertler, M. (1999). Monetary Policy and Asset Price Volatility. In New Challenges for Monetary Policy. Kansas City: Federal Reserve Bank of Kansas City.
11.
Jordà, Ò., Schularick, M., & Taylor, A. M. (2011). Financial crises, credit booms, and external imbalances: 140 years of lessons. IMF Economic Review, 59(2), 340–378.
12.
Beber, A. & Pagano, M (2010). Short-selling bans in the crisis: A misguided policy. In Vox. Accessed on May 28, 2015.
Metadata
Title
Exchanges: Link to the Real Economy
Author
Michael Heise
Copyright Year
2017
Book
Equity Markets in Transition

Print ISBN: 978-3-319-45846-5

Electronic ISBN: 978-3-319-45848-9

Copyright Year: 2017

DOI
https://doi.org/10.1007/978-3-319-45848-9_11