Financial regulation and monetary arrangements after 1992 : Proceedings of a conference held in Gothenburg, May 21-23, 1990 PDF
Preview Financial regulation and monetary arrangements after 1992 : Proceedings of a conference held in Gothenburg, May 21-23, 1990
CONTRIBUTIONS TO ECONOMIC ANALYSIS 204 Honorary Editor: J. TINBERGEN Editors: D. W. JORGENSON J. WAELBROECK NORTH-HOLLAND AMSTERDAM · LONDON · NEW YORK · TOKYO FINANCIAL REGULATION AND MONETARY ARRANGEMENTS AFTER 1992 Edited by Clas WIHLBORG Department of Economics University of Gothenburg Gothenburg, Sweden Michèle FRATIANNI School of Business Indiana University Bloomington, IN, U.S.A. Thomas D. WILLETT Department of Economics Claremont Graduate School Claremont, CA, U.S.A. 1991 NORTH-HOLLAND AMSTERDAM · LONDON · NEW YORK · TOKYO ELSEVIER SCIENCE PUBLISHERS B.V. Sara Burgerhartstraat 25 P.O. Box 211, 1000 AE Amsterdam, The Netherlands Distributors for the United States and Canada: ELSEVIER SCIENCE PUBLISHING COMPANY INC. 655 Avenue of the Americas New York, N.Y. 10010, U.S.A. Library of Congress Cataloging-in-Publication Data Financial regulation and monetary arrangements after 1992 / edited by Clas Wihlbcrg, Michèle Fratianni, Thomas D. Willett. p. cm. — (Contributions to economic analysis ; 204) Includes bibliographical references and indexes. ISBN 0-444-89083-1 1. Financial services industry—Government policy—Congresses. 2. Monetary policy—Congresses. 3. Financial services industry- -Government policy—Europe—Congresses. 4. Monetary policy—Europe- -Congresses. I. Wihlborg, Clas. II. Fratianni, Michèle. III. Willett, Thomas D. IV. Series. HG63.F56 1991 332.4*94—uc20 91-33789 CIP ISBN: 0 444 89083 1 © 1991 Elsevier Science Publishers B.V. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher, Elsevier Science Publishers B.V, Permissions Department, P.O. Box 521, 1000 AM Amsterdam, The Netherlands. Special regulations for readers in the U.S.A. - This publication has been registered with the Copyright Clearance Center Inc. (CCC), Salem, Massachusetts. Information can be obtained from the CCC about conditions under which photocopies of parts of this publication may be made in the U.S.A. All other copyright questions, including photocopying outside of the U.S.A., should be referred to the copyright owner, Elsevier Science Publishers B.V, unless otherwise specified. No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. pp. 173-199, 311-318: Copyright not transferred. PRINTED IN THE NETHERLANDS INTRODUCTION TO THE SERIES This series consists of a number of hitherto unpublished studies, which are intro- duced by the editors in the belief that they represent fresh contributions to economic science. The term "economic analysis" as used in the title of the series has been adopted because it covers both the activities of the theoretical economist and the research worker. Although the analytical methods used by the various contributors are not the same, they are nevertheless conditioned by the common origin of their studies, namely theoretical problems encountered in practical research. Since for this reason, busi- ness cycle research and national accounting, research work on behalf of economic policy, and problems of planning are the main sources of the subjects dealt with, they necessarily determine the manner of approach adopted by the authors. Their methods tend to be "practical" in the sense of not being too far remote from appli- cation to actual economic conditions. In additon they are quantitative. It is the hope of the editors that the publication of these studies will help to stimulate the exchange of scientific information and to reinforce international cooperation in the field of economics. The Editors Vil Preface This volume contains the proceedings of a conference held in the city of Gothenburg on May 21-23,1990, preceeded by a planning conference held on the island of Marstrand just north of the city on September 6-7, 1989. The conferences were organized to launch financial and monetary economics as a major focus for study and research at the School of Economics and Commercial Law within the University of Göteborg. With the city's traditional role as the major port and center for international trade activity in Sweden it was natural to focus the conferences, as well as the school's education and research program, on international aspects of monetary and financial economics. The major objective of the conference was to stimulate research on the linkage between structural and regulatory development in the financial services industry, on the one hand, and monetary arrangements and exchange rate regimes, on the other. A second objective, with the background of rapid development of a framework for economic integration in Western Europe, was to analyze and discuss potential future regulatory policy conflicts among insiders in the European Community (EC), as well as between the EC and major "outsiders". These objectives are discussed in more detail in the Objectives and Overview chapter. It is risky to produce a volume such as this one, containing the proceedings of a conference on a topic in rapid development. The academic papers are sufficiently general, however, not to depend for their relevance on specific reforms within the EC. Contributions within this volume discussing reforms from the perspectives of individual countries run a greater risk of being overtaken by real world events. The risk is small, however, since the formal reforms that take effect before the end of 1992 provide only a framework for further development of EC-institutions and regulation during the foreseeable future. Major unanticipated events did occur during the planning period for the conference. The Berlin Wall fell, Soviet domination of Eastern Europe was broken, and market oriented reforms were initiated even within the Soviet Union. For a while, it looked as if the 1992 process was going to stall in the face of the overwhelming transition problem facing the former communist bloc. Reforms within the EC continued, however, and they may even have obtained greater urgency. One session was added to the conference in order to incorporate the East European perspective on financial market reform in the EC, and on problems of transition to convertibility of currencies. The participants also obtained a vivid account of the negotiations between East and West Germany on conditions for creating a German monetary union. Hans-Joachim Huss came directly from the conclusion of these negotiations to the conference. His insightful after-dinner presentation of the historic agreement was highly appreciated. My deepest gratitude for contributions to the success of the conference, as well as to the completion of this volume, goes to Ms Karin Hane, my assistant in the Department of VIH Preface Economics. Without her administrative and organizational talents and capacity, the conference would not have reached even the planning stage. She understood and handled with great skill the complexity (unforeseen by myself) o fthe organizational task. Similarly, without her efforts this volume, with all the extra work related to the preparation of a camera-ready manuscript, would not have been completed. I am also grateful to Jan Nilsson, President of the University of Göteborg, and Lars Nordström, Dean of the School of Economics and Commercial Law, for their support. Valuable input during the conference or to the preparation of this volume has been provided by Goran Andersson, Mats-Ola Forsman, Anders Johansson, Joao Loureiro, Asal Maher, Cunwu Pan, Lulseged Yohannes, and Max Zamanian, Ph.D. students in the department of economics, and Boo Sjöö, research fellow in the department. Finally, I would like to thank the sponsors of the conference, whose contributions were essential complements to Karin Hane's skills. Skandinaviska Enskilda Banken, Volvo, and PK-banken (now Nordbanken) were sponsors at an early stage. I am grateful to Otto Wrangel, Lennart Jeansson, and Mikael Wallgren in these firms for their personal support that made the planning conference possible. Additional support was obtained from Första Sparbanken, Handelshögskolefonderna at the Gothenburg School of Economics and Commercial Law and the Center for Economic Policy Studies at the Claremont Graduate School. Last but not least, I would like to thank the Tore Browaldh, Jan Wallander Research Foundations at Svenska Handelsbanken for sponsoring the main conference. Gothenburg, June 7, 1991 Clas Wihlborg Felix Neubergh Professor of Financial Economics List of Conference Participants Marstrand, September 6-7, 1989, and Gothenburg, May 21-23, 1990 Sven Arndt Professor, Claremont McKenna College, Claremont Göran Bergendahl Professor, Gothenburg School of Economics and Commercial Law Stanislav M. Borisov Professor, Institute of World Economy and Foreign Relations, Moscow William H. Branson Professor, Princeton University Franco Bruni Professor, Bocconi University, Milan Richard Burdekin Professor, Claremont McKenna College, Claremont Wlodek Bursztyn Dr, Gothenburg School of Economics and Commercial Law, Nigel Carter Dr, Bank of England, London Emil-Maria Ciaassen Professor, University of Paris-Dauphine, Paris J. Kimball Dietrich Professor, University of Southern California, Los Angeles Patricia Dillon Professor, Scripps College, Claremont Igor G. Doronin Dr, Institute of World Economy and International Relations, Moscow John Driffill Professor, Queen Mary and Westfield College, University of London B. Espen Eckbo Professor, University of British Columbia, Vancouver Gunnar Eliasson Professor, Director, The Industrial Institute for Economic and Social Research (IUI), Stockholm Emil Ems Senior Officer, Economic Affairs Department, EFT A, Geneva Peter Englund Professor, University of Uppsala David Folkerts-Landau Deputy Chief of Financial Studies, International Monetary Fund, Washington, DC Elena Folkerts-Landau Dr, World Bank, Washington, DC Thomas Franzén Dr, Deputy Governor, Central Bank of Sweden, Stockholm Michèle Fratianni Professor, Grad. School of Business, Indiana University, Bloomington Alberto Giovannini Professor, Grad. School of Business, Columbia University, New York Reuven Glick Dr, Federal Reserve Bank of San Francisco, San Francisco Linda S. Goldberg Professor, New York University Morris Goldstein Dr, International Monetary Fund, Washington Charles Goodhart Professor, London School of Economics Daniel Gros Dr, Centre for European Policy Studies, Brussels Thorvaldur Gylfason Professor, University of Iceland, and IIES, Stockholm Jürgen von Hagen Professor, Grad. School of Business, Indiana University, Bloomington List of Conference Participants Mats Hallgren Senior Advisor, Skandinaviska Enskilda Banken, Stockholm Bengt Hane Director Financial Relations, AB Volvo, Gothenburg Robert Hodrick Professor, Kellogg School of Management, Northwestern University, Chicago Bengt Holmström Professor, Yale School of Organization and Management, New Haven Hans-Joachim Huss Dr, Ministry of Finance, Bonn Michael Hutchison Professor, Bank for International Settlements, Basle, and Crown College, University of California, Santa Cruz Jan Häggström Dr, Svenska Handelsbanken, Stockholm Lars Jonung Professor, Stockholm School of Economics Björn Kârfalk Vice President and Treasurer, AB Volvo, Gothenburg Karen K. Lewis Professor, University of Pennsylvania, Philadelphia, and New York University Nils Lundgren Dr, Nordbanken, Stockholm Johan A. Lybeck Professor, Gothenburg School of Economics and Commercial Law Michael Melvin Professor, College of Business, Arizona State University, Tempe John O. Montgomery Dr, Board of Governors of the Federal Reserve System, Washington DC Niels Chr. Nielsen Professor, Copenhagen School of Economics and Business Administration Eva Nisser Financial Consulting, Stockholm Yoshiharu Oritani Manager, Research Division, The Bank of Japan, Tokyo Lars Oxelheim Professor, Gothenburg School of Economics and Commercial Law, and IUI, Stockholm Richard Portes Dr, Centre for Economic Policy Research, London Aris Protopapadakis Professor, Claremont Graduate School, Claremont Tad Rybczynski Professor, City University, London Anthony M. Santomero Professor, The Wharton School of the University of Pennsylvania, Philadelphia Stefan Schönberg Dr, Deutsche Bundesbank, Frankfurt Boo Sjöö Dr, Gothenburg School of Economics and Commercial Law Göran Skogh Professor, School of Economics and Management, Lund University Roy C. Smith Professor, Stern School of Business, New York University, and Goldman Sachs, New York Ulf Sternhufvud Dr, Skandinaviska Enskilda Banken, Gothenburg Richard M. Sweeney Professor, School of Business Administration, Georgetown University, Washington, DC Hans T:son Söderström Dr, Centre for Business and Policy Studies (SNS), Stockholm Hiroo Taguchi Dr, The Bank of Japan, Tokyo Niels Thygesen Professor, University of Copenhagen Ingo Walter Professor, Stern School of Business, New York University, and INSEAD Sir Alan A. Walters Director, Putnam, Hayes & Bartlett, Washington, DC Roland Vaubel Professor, University of Mannheim List of Conference Participants XI Steven R. Weisbrod President, Weisbrod Group Ltd, New York Clas Wihlborg Professor, Gothenburg School of Economics and Commercial Law Per Wijkman Dr, EFTA Secretariat, Geneva Thomas D. Willett Professor, Claremont Graduate School, Claremont José Vinals Dr, Bank of Spain, Madrid Pehr Wissen Dr, Svenska Handelsbanken, Stockholm List of Tables Table 1 Banks and Average Balance Sheet Items 29 Table 2 Country and Bank Market Data 31 Table 3 Bank Average Operating Statistics by Country 31 Table 4 Correlation Coefficients between Banking Market Variables 32 Table 5 Estimation of Value Added and Factor Share Equations 34 Table 1 Volume of Completed International Merger and Corporate Transactions (USA) 102 Table 2 Volume of Completed International Merger and Corporate Transactions (Europe) 103 Table 3 Rankings of Industry Groups of U.S. and European M&A Seller Companies by SIC Code 105 Table 4 Rankings of Industry Groups of U.S. and European Buyer Companies by SIC Code 107 Table 5 Pearson Correlation of U.S. and European Industries Participating in M&A Transactions 109 Table 6 Correlations of Top 25 Industry Group of U.S. and European M&A Seller Companies by SIC Code 110 Table 7 Correlations of Top 25 Industry Group of U.S. and European M&A Buyer Companies by SIC Code 111 Table 8 Pearson Correlation of Weighted Values of U.S. and European Industries Participating in M&A Transactions 112 Table 9 Volume of Completed Intra-European M&A Trans- actions by Country 113
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