Financialization of Europe: a comparative perspective

We provide evidence about the process of financialization in Europe in the period 1999-2016. We combine different sources of data (ECB Data Warehouse, BvD Orbis Database, Bank Scope) and we compute different indicators that allow us to grasp different features of the financialization process in the Euro Area and in a group of selected countries. Furthermore, we shed lights on some new aspects of this process by constructing the network of direct and indirect financial exposures in the Euro Area, which provides an overview of the possible channels of propagation of financial risk in the area. Our findings show the presence of a trend towards increased financialization in Europe. At the same time, they also indicate significant cross-country heterogeneity in the characteristics of the process and they show that the increase in financialization has been much milder in countries of continental Europe than in the United Kingdom. Finally, our empirical analysis of the network of financial exposures reveals an overwhelming importance of indirect exposures, that could then serve as important conduits for the transmission of shocks in the area, as well as the increased globalization of the Euro Area financial exposures.

working_paper_2018_15_cover

Financialization of Europe: a comparative perspective

Veronika Stolbova
Department of Banking and Finance, University of Zürich, Switzerland

Stefano Battiston
Department of Banking and Finance, University of Zürich, Switzerland

Mauro Napoletano
Observatoire Français de Conjonctures Economiques (OFCE), France

Andrea Roventini
Institute of Economics, Scuola Superiore Sant’Anna, Italy

Working Paper
15/2018 May