Politicians, central banks, and the shape of financial supervision architectures
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 14 November 2008
Abstract
Purpose
This paper aims to investigate the role of the quality of government on financial supervisory structures in different countries.
Design/methodology/approach
The objectives are pursued by means of econometric tools based on probit and multinomial logit techniques.
Findings
It is found that the quality of government plays a crucial role in determining supervision unification. “Good” policymakers (helping hand types) prefer a unified financial authority while “bad” ones (grabbing hand type) choose specialized or hybrid models depending on how powerful is the central bank.
Research limitations/implications
Research limitations are represented by the endogenous nature of political variables with respect to the supervisory design. Suggestions for future research rely on finding adequate instrumental variables to be included in the empirical analysis in order to address causality issues.
Practical implications
The paper follows a positive approach, explaining why different supervisory structures are observed around the world. As a consequence, it does not provide any normative implication.
Originality/value
Its original contribution can be identified in the first attempt to include political preferences in determining the choice among different regimes of financial supervision.
Keywords
Citation
Dalla Pellegrina, L. and Masciandaro, D. (2008), "Politicians, central banks, and the shape of financial supervision architectures", Journal of Financial Regulation and Compliance, Vol. 16 No. 4, pp. 290-317. https://doi.org/10.1108/13581980810918387
Publisher
:Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited