Contribution long abstract

The Political Economy of Financial Intermediation is a process often characterized by self-interested regulators whose decisions are influenced by the banking system as financial intermediation and other constituencies who may have little regard for regulatory policies, and the role of Governments as broader social welfare in fragile countries that need political stability, economic reforms, and economic development policies at the same time. According to the article “Political Economy of Banking ”, the impact of market-based banking on the domestic political economy and the impact of the international financial crisis are discussed. (I.Hardie, S.Maxfield, A.Verdun, 2013).

Furthermore, according to the IMF, “financial intermediation levels in the Western Balkans are relatively low because they reflect in part low incomes in the region.” Also, the analysis of the risk of loans and borrowing by fragile states, and if there is a correlation between the political stability (political system, laws, and government), the banking system (low rates, savings, monetary factors, and investment), and economic development (business, and financial Institutions created by Government laws and industry).

Results of study shows, the financial systems tend to fail if there is excessive inflation in the economy and the banking system should maintain an equilibrium in periods of financial crises in countries, for example in fragile states such as Western Balkan countries need a lot of reforms (financial laws, taxation, and regulatory laws regarding in bankrupting levels) also, reforms in economic development in a manner to maintain a stable relationship with a banking system and EU integration Reforms.