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Comparing Financial Systems: A structural Analysis

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  • Sylvain Champonnois

    ()
    (Economics Princeton University)

Abstract

This paper investigates whether the financial markets are relatively more efficient than banks in the UK than in continental Europe. The UK channels a larger fraction of the financial flow to the firms through financial markets than continental Europe but this is explained by larger firms in the UK, not relatively more efficient markets. This conclusion is drawn from an industry-level structural estimation using data on the UK, France, Germany and Italy. The structural model is based on a novel theory of capital allocation and investment in which the decisions of heterogenous firms across financing instruments are aggregated in closed-form

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File URL: http://repec.org/sed2006/up.2360.1139975517.pdf
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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 520.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:520

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Keywords: Financial structure; bank finance; market finance; heterogenous firms; structural estimation;

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Cited by:
  1. Costinot, Arnaud, 2007. "Heterogeneity and Trade," University of California at San Diego, Economics Working Paper Series qt4ns3899g, Department of Economics, UC San Diego.
  2. Solomon, Bernard-Daniel, 2008. "Banks as Better Monitors and Firms' Financing Choices in Dynamic General Equilibrium," MPRA Paper 23958, University Library of Munich, Germany, revised 01 Jun 2010.
  3. Russ, Katheryn N. & Valderrama, Diego, 2012. "A theory of bank versus bond finance and intra-industry reallocation," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 652-673.

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