Comparing financial systems - a structural analysis

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Comparing financial systems - a structural analysis

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Sylvain Champonnois () (Princeton University, Princeton, NJ 08544 USA.)

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Sylvain Champonnois

Abstract

This paper builds a model of investment and financing that incorporates heterogeneous firms into general equilibrium. In order to characterize the financial structure of an economy, the model connects the share of market finance in total external finance and the distribution of firm sizes into a simple structural equation, with parameters related to the cost of market finance (compared to intermediated finance). We estimate the relative cost of market finance across countries with data on external financing and firm sizes from France, Germany, Italy, Spain and the United Kingdom. Using the structural model, we propose an explanation of the empirical correlation across countries between estimated financing costs and the characteristics of the population of firms based on welfare maximization. JEL Classification: E20, E44, C13.

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Paper provided by European Central Bank in its series Working Paper Series with number 702.

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Length: 53 pages
Date of creation: Dec 2006
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Handle: RePEc:ecb:ecbwps:20060702

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Paper
- Sylvain Champonnois, 2006. "Comparing Financial Systems: A structural Analysis," 2006 Meeting Papers 520, Society for Economic Dynamics. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-01-14 (All new papers)
NEP-EEC-2007-01-14 (European Economics)

References listed on IDEAS
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Rasmus Rüffer & Marcelo Sánchez & Jian-Guang Shen, 2007. "Emerging Asia’s growth and integration - how autonomous are business cycles?," Working Paper Series 715, European Central Bank. [Downloadable!]

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