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Why do financial systems differ? History matters

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  • Monnet, Cyril
  • Quintin, Erwan

Abstract

We describe a dynamic model of financial intermediation in which fundamental characteristics of the economy imply a unique equilibrium path of bank and financial market lending. Yet we also show that economies whose fundamental characteristics have converged may continue to have very different financial structures. Because setting up financial markets is costly in our model, economies that emphasize financial market lending are more likely to continue doing so in the future, all else equal. JEL Classification: L16, G10, G20, N20

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 54 (2007)
Issue (Month): 4 (May)
Pages: 1002-1017

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Handle: RePEc:eee:moneco:v:54:y:2007:i:4:p:1002-1017

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Web page: http://www.elsevier.com/locate/inca/505566

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  1. Patrick Bolton & Xavier Freixas, 2000. "Equity, Bonds, and Bank Debt: Capital Structure and Financial Market Equilibrium under Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 324-351, April.
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  8. Richard Tilly, 1998. "Universal Banking in Historical Perspective," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(1), pages 7-, March.
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  12. Fohlin, Caroline, 2002. "Regulation, taxation and the development of the German universal banking system, 1884 1913," European Review of Economic History, Cambridge University Press, vol. 6(02), pages 221-254, August.
  13. Tilly, Richard, 1982. "Mergers, External Growth, and Finance in the Development of Large-Scale Enterprise in Germany, 1880–1913," The Journal of Economic History, Cambridge University Press, vol. 42(03), pages 629-658, September.
  14. O. Emre Ergungor, 2003. "Financial system structure and economic development: structure matters," Working Paper 0305, Federal Reserve Bank of Cleveland.
  15. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January.
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  17. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
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Cited by:
  1. Hans J. Blommestein, 2006. "Visions about the Future of Banking," SUERF Studies, SUERF - The European Money and Finance Forum, number 2006/2 edited by Morten Balling.
  2. Thorsten Koeppl & Cyril Monnet & Erwan Quintin, 2008. "Efficient institutions," Working Papers 08-33, Federal Reserve Bank of Philadelphia.
  3. Alexis Derviz, 2007. "Cross-Border Risk Transmission by a Multinational Bank," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 1(1), pages 87-111, March.

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