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Financial Infrastructure, Group Interests, and Capital Accumulation

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  • Biaggio Bossone
  • Sandeep Mahajan
  • Farah Zahir
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    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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    Bibliographic Info

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

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    Length: 34
    Date of creation: 01 Feb 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/24

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    Related research

    Keywords: Banks; Capital accumulation; banking; banking sector; financial markets; financial sector; transaction cost; financial intermediation; financial system; bond; financial systems; financial economics; financial market; moral hazard; net interest margin; banking system; stock market; resource allocation; stock returns; bank loans; deposit money; banking industry; financial services; stock markets; bankrupt; banking business; financial institutions; financial structure; bank financing; banking activities; bank finance; bank credit; asset liquidation; bank lending; bank contracts; bank deposits; financial assets; financial sector development; bank loan; excess demand; stock market liberalization; financial reform; equity markets; stock market liberalizations; bank profit; bank groups; asset valuation; cash flow; equity shares; bankrupt firm; banking market; equity market; bank borrowing; country comparison; bank capital; corporate banking; financial contracts; banking sector efficiency; deposit rate; bank deposit; bank relationships; universal banking; international standards; banking technologies; financial intermediary development; bank monitoring; banking relationships; financial market development; financial fragility; financial innovation; domestic financial markets; financial instruments; financial regulation;

    References

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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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    Cited by:
    1. Pinto, Brian & Zahir, Farah, 2004. "India : why fiscal adjustment now," Policy Research Working Paper Series 3230, The World Bank.

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