Abstract
Financialisation research has originally focussed on the US experience, but the concept is now increasingly applied to emerging economies (EMEs). There is a rich literature stressing peculiarities of individual country experiences, but little systematic comparison across EMEs. This paper fills this gap, providing an overview of the debate and identifying six financialisation interpretations for EMEs. These different interpretations stress (1) financial deregulation, (2) foreign financial inflows, (3) asset price volatility, (4) the shift from bank-based to market-based finance, (5) business debt, and (6) household indebtedness. We construct and compare measures of the six financialisation interpretations across a sample of 17 EMEs from Latin America, emerging Europe, Africa and Asia, contrasting them with the US and UK, two financialised economies. We find considerable variation in financialisation experiences of EMEs. Asset price volatility is found across the continents. Asia has been more exposed to capital inflows, stock markets have gained importance and private sector debt has risen. In emerging Europe financial deregulation has been more pronounced with lower levels but strong increases in household debt. The picture is similar in South Africa, the African EME in the sample, where household debt is comparatively high. Financialisation in Latin America is weaker according to our measures.
Highlights
The term ‘financialisation’ was coined in the early 1990s1 and has since been interpreted in varying ways, resulting in different research strands across a range of academic disciplines, including economics, sociology and geography
Finance plays a prominent role in both, the mainstream and the financialisation debate
While mainstream economics typically highlights the efficiency of financial markets and regards financial instability as the results of market failure, most non-mainstream economic theories see the financial sector as intrinsically unstable
Summary
The term ‘financialisation’ was coined in the early 1990s1 and has since been interpreted in varying ways, resulting in different research strands across a range of academic disciplines, including economics, sociology and geography. The aim of the paper is to outline different interpretations of financialisation in EMEs that exist in the literature, rather than providing a detailed account of the various research strands in the broader financialisation debate (see Karwowski, Shabani & Stockhammer (2016) for an exposition and assessment). We identify six such interpretations that can be quantified: (1) Financial deregulation and the integration of EMEs into the global financial system drives financialisation in these countries. Asset price volatility, which can be found across all regions, has been strong in many Asian EMEs. In comparison to Asia, financial deregulation was more pronounced in emerging Europe and South Africa.
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