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Why do French civil-law countries have higher levels of financial efficiency?

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  • Simplice A., Simplice

Abstract

The dominance of English common-law countries in prospects for financial development in the legal-origins debate has been debunked by recent findings. Using exchange rate regimes and economic/monetary integration oriented hypotheses, this paper proposes an “inflation uncertainty theory” in providing theoretical justification and empirical validity as to why French civil-law countries have higher levels of financial allocation efficiency. Inflation uncertainty, typical of floating exchange rate regimes accounts for the allocation inefficiency of financial intermediary institutions in English common-law countries. As a policy implication, results support the benefits of fixed exchange rate regimes in financial intermediary allocation efficiency.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33950.

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Date of creation: 12 Oct 2011
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Handle: RePEc:pra:mprapa:33950

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Keywords: Banking; allocation efficiency; exchange rate; inflation; economic integration;

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