Institutions Matter: Financial Supervision Architecture, Central Bank and Path Dependence. General Trends and the South Eastern European Countries

62 Pages Posted: 20 Jul 2022

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics; Bocconi University - Department of Economics (ECO)

Marc Quintyn

International Monetary Fund (IMF)

Date Written: September 1, 2008

Abstract

We propose a path dependence approach to analyze the evolution of the financial supervisory architecture, focusing on the institutional role of the central bank, and then apply our framework to describe the institutional settings in a selected sample of countries. The policymaker who decides to maintain or reform the supervisory architecture is influenced by the existing institutional setting in a systematic way: the more the central bank is actually involved in supervision, the less likely a more concentrated supervisory regime will emerge, and vice versa (path dependence effect). We test the path dependence effect describing and evaluating the evolution and the present state of the architecture of six national supervisory regimes in South Eastern Europe (SEE): Albania, Bulgaria, Greece, Romania, Serbia and Turkey. The study of the SEE countries confirms the postulated role of the central bank in the institutional setting. In five cases the high involvement of the central bank in supervision is correlated with a multi–authority regime, while in one case a high degree of financial supervision unification is related with low central bank involvement.

Keywords: Financial Supervision; Central Banks; Path Dependence; Political Economy; South Eastern Europe

JEL Classification: G18; G28; E58

Suggested Citation

Masciandaro, Donato and Quintyn, Marc, Institutions Matter: Financial Supervision Architecture, Central Bank and Path Dependence. General Trends and the South Eastern European Countries (September 1, 2008). Bank of Greece Working Paper No. 89, Available at SSRN: https://ssrn.com/abstract=4165668 or http://dx.doi.org/10.2139/ssrn.4165668

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - Department of Economics (ECO) ( email )

Via Gobbi 5
Milan, 20136
Italy

Marc Quintyn

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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