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On the Formation and Structure of International Exchanges

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Author Info
Matthew J. Clayton (New York University)
Bjorn N. Jorgensen () (Harvard University)
Kenneth A. Kavajecz (University of Pennsylvania)

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Abstract

We investigate the formation and structure of 248 financial exchanges throughout the world. First, we empirically analyze the determinants of exchange formation as well as the impact of exchange formation on the domestic country's economy. Second, conditional on formation, we use a probit model to relate the choice of trading mechanism to the characteristics of the economic environment in which the exchange exists. We find that the main determinants of exchange formation in a country are the degree of economic freedom, the size of the economy, the availability of technology, and the legal system. In addition, we find that the impact of exchange formation on the macro economy is limited to a reduction in the growth of the monetary aggregates with no significant impact on productivity. Lastly, our results show that the choice if trading mechanism depends on the country's economic development, the degree of competition, and the extent of economic freedom.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 99-079/2.

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Date of creation: 08 Oct 1999
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Handle: RePEc:dgr:uvatin:19990079

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  5. Pirrong, S.C., 1998. "The Organization of Financial Exchange Markets: Theory and Evidence," Washington University 98-01, Business, Law and Economics Center, John M. Olin School of Business, Washington University.
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  20. Hamao, Yasushi & Hasbrouck, Joel, 1995. "Securities Trading in the Absence of Dealers: Trades and Quotes on the Tokyo Stock Exchange," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 8(3), pages 849-78. [Downloadable!] (restricted)
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  28. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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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. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio L., 2002. "Explaining the migration of stocks from exchanges in emerging economies to international centers," Policy Research Working Paper Series 2816, The World Bank. [Downloadable!]
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  2. Malkamäki , Markku & Topi, Jukka, 1999. "Strategic Challenges for Exchanges and Securities Settlement," Research Discussion Papers 21/1999, Bank of Finland. [Downloadable!]
  3. Ben Slimane, FATEN, 2007. "L'Evolution des Marchés Boursiers Européens: Enjeux et limites
    [European Stock Market Evolution]    ," MPRA Paper 2607, University Library of Munich, Germany. [Downloadable!]
  4. Scott Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2003. "Does opening a stock exchange increase economic growth?," Working Paper 2003-36, Federal Reserve Bank of Atlanta. [Downloadable!]
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