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Financial Structure and Economic Growth: A Non-Technical Survey

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Veronika Dolar
Césaire Meh

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Paper provided by Bank of Canada in its series Working Papers with number 02-24.

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Length: 43 pages Abstract: There is a large body of literature that studies the relationship between financial structure (that is, the degree to which the financial system is either market- or intermediary-based) and long-run economic growth. This paper gives a non-technical survey of that literature designed for a general audience. The literature suggests that financial structure does not explain differential growth rates across countries. What matters for growth is the overall level and quality of financial services. Therefore, the best way to examine the connection between financial structure and growth is not to study how markets and intermediaries can substitute for each other, but rather how markets and intermediaries complement one another.
Date of creation: 2002
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Handle: RePEc:bca:bocawp:02-24

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Keywords: Development economics; Economic models; Financial institutions; Financial markets; Financial services;

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Find related papers by JEL classification:
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
G00 - Financial Economics - - General - - - General
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jason Allen & Walter Engert & Ying Liu, 2006. "Are Canadian Banks Efficient? A Canada--U.S. Comparison," Working Papers 06-33, Bank of Canada. [Downloadable!]
  2. Karine Gobert & Patrick González & Michel Poitevin & Alexandra Lai, 2002. "Bank Value and Financial Fragility," CIRANO Project Reports 2002rp-07, CIRANO. [Downloadable!]
    Other versions:
  3. LG. Deidda & B. Fattouh, 2005. "Banks, Financial Markets and Growth," Working Paper CRENoS 200511, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
    Other versions:
  4. Césaire A. Meh & Vincenzo Quadrini, 2004. "Uninsurable Investment Risks," Working Papers 04-29, Bank of Canada. [Downloadable!]
    Other versions:
  5. Carol Ann Northcott, 2004. "Competition in Banking: A Review of the Literature," Working Papers 04-24, Bank of Canada. [Downloadable!]
  6. Ramdane Djoudad & Jack Selody & Carolyn Wilkins, 2005. "Does Financial Structure Matter for the Information Content of Financial Indicators?," Working Papers 05-33, Bank of Canada. [Downloadable!]
  7. Koetter, Michael & Wedow, Michael, 2005. "Finance and growth in a bank-based economy: is it quantity or quality that matters?," Discussion Paper Series 2: Banking and Financial Studies 2006,02, Deutsche Bundesbank, Research Centre. [Downloadable!]
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