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Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU

Abstract

Why do large European banks lobby for monetary union? We show in a game-theoretic model that montary union can trigger a change in the structure of the market for international banking transactions with asymmetric effects on profits: large banks are induced to cooperate internationally and gain from European Monetary Union (EMU), while small banks are likely to lose. Monetary union can be interpreted as a device for large banks to push small banks out of the market for cross-border financial services.

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Grüner, H.P., Hefeker, C. Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU. Open Econ Rev 7, 183–198 (1996). https://doi.org/10.1007/BF01886820

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  • DOI: https://doi.org/10.1007/BF01886820

Key words

  • European Monetary Union
  • interest groups
  • banking policy
  • bank cooperation

JEL Classification Numbers

  • E5
  • F3
  • G2