Decoupling of the Financial Sector from the Real Economy?
Menkhoff, Lukas, Tolksdorf, Norbert
2001, IX, 234 p.
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International financial markets play an increasing role in the mind of the general public, much more than they did a few decades ago. There can be no doubt that the size of financial markets has grown at a faster pace than the markets for goods and services in the past ten or twenty years. However, it is still unclear whether this is a desirable development, or whether it indicates looming risks. The book documents and classifies the debate about the potential decoupling of the financial sector from the real economy, and then to introduce it into the context of established scientific lines of research. We try to provide a logical structuring of the heterogeneous arguments by postulating a decoupling hypothesis (phenomena, causes, consequences). Various models are presented in this structure and stylized facts can be isolated.
Introduction.- Defining the problem.- Classification of the decoupling problem.- Structure of the study.- The relative sizes of the financial sector and the real economy.- Definitional background to financial accounts.- Empirical studies of financial sector growth in the development process.- Studies of the decoupling hypothesis.- Current empirical studies of decoupling characteristics.- Analysis of financial asset ratios in Germany.- Analysis of international foreign exchange trading turnover.- Analysis of equity market volumes focusing on the USA.- Excursus: Costly financial market turnover without a reasonable result?.- Analysis of possible decoupling consequences for the financial sector.- Decoupling as a reflection of CAPM mi-specifications.- Price volatility.- Prices.- Financial sector stability.- Economic policy: Assessment and options.- Evidence for the decoupling hypothesis.- Three evaluation-driven response concepts.- Concluding assessment of the decoupling hypothesis.