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Stock markets, banks, and economic development:theory and evidence

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  • Beck, Thorsten

    ()
    (World Bank)

Abstract

This paper discusses the different functions that capital markets and banks have in economic development, and it reviews the debate about marketbased vs. bank-based financial systems. Using data for a sample of 40 countries over the period 1975-98, the paper then shows that variation in both banking sector and stock market development can explain variation in economic growth, but the degree to which a financial system is market- or bank-based cannot explain economic development across countries. This is consistent with the financial services view, which focuses on the services provided rather than the providers of services and which emphasises complementarities between markets and intermediaries.

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File URL: http://www.eib.org/attachments/efs/eibpapers/eibpapers_2003_v08_n01_en.pdf#page=36
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Bibliographic Info

Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 2/2003.

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Length: 19 pages
Date of creation: 09 Jun 2003
Date of revision:
Handle: RePEc:ris:eibpap:2003_002

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Related research

Keywords: Capital Markets; Banks; Economic development; Financial systems;

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References

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  2. Jappelli, Tullio & Pagano, Marco, 2002. "Information sharing, lending and defaults: Cross-country evidence," Journal of Banking & Finance, Elsevier, vol. 26(10), pages 2017-2045, October.
  3. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-50, July.
  4. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January.
  5. Elisabeth Huybens & Bruce D. Smith, 1997. "Inflation, Financial Markets and Long-Run Real Activity," Working Papers 9707, Centro de Investigacion Economica, ITAM.
  6. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2003. "Bank Supervision and Corporate Finance," NBER Working Papers 9620, National Bureau of Economic Research, Inc.
  7. Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 467-482.
  8. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  9. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 195-209, April.
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  11. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2000. "Funding growth in bank-based and market-based financial systems : evidence from firm level data," Policy Research Working Paper Series 2432, The World Bank.
  12. Ross Levine, 1998. "The legal environment, banks, and long-run economic growth," Proceedings, Federal Reserve Bank of Cleveland, issue Aug, pages 596-620.
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  19. Boot, Arnoud W A & Thakor, Anjan, 1995. "Financial System Architecture," CEPR Discussion Papers 1197, C.E.P.R. Discussion Papers.
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  21. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
  22. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
  23. John H. Boyd & Edward C. Prescott, 1985. "Financial intermediary-coalitions," Staff Report 87, Federal Reserve Bank of Minneapolis.
  24. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
  25. Bencivenga Valerie R. & Smith Bruce D. & Starr Ross M., 1995. "Transactions Costs, Technological Choice, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 67(1), pages 153-177, October.
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