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Financial Infrastructure, Group Interests, and Capital Accumulation: Theory, Evidence, and Policy

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Author Info
Biaggio Bossone
Sandeep Mahajan
Farah Zahir
Abstract

This study presents a theory of financial infrastructure - or the set of rules, institutions, and systems within which agents carry out financial transactions. It investigates the effects of financial infrastructure development on financial architecture and real capital accumulation, taking into account financial-sector special interests. It shows that a more developed infrastructure promotes financial market growth, reduces the scope of traditional banking, and helps investors make more efficient investment decisions. The theory presented explains why traditional banking predominates in the early stages of economic development and becomes relatively less important as the economy develops, and why banks may retard financial sector development. The study provides evidence in support of its predictions.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/24.

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Length: 34 pages
Date of creation: 28 Feb 2003
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Handle: RePEc:imf:imfwpa:03/24

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Keywords: Capital accumulation Banks

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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.:
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  25. Seward, James K, 1990. " Corporate Financial Policy and the Theory of Financial Intermediation," Journal of Finance, American Finance Association, vol. 45(2), pages 351-77, June. [Downloadable!] (restricted)
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Full references

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. Pinto, Brian & Zahir, Farah, 2004. "India : why fiscal adjustment now," Policy Research Working Paper Series 3230, The World Bank. [Downloadable!]
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