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Why do financial systems differ? History matters

  • Monnet, Cyril
  • Quintin, Erwan

We describe a dynamic model of financial intermediation in which fundamental characteristics of the economy imply a unique equilibrium path of bank and financial market lending. Yet we also show that economies whose fundamental characteristics have converged may continue to have very different financial structures. Because setting up financial markets is costly in our model, economies that emphasize financial market lending are more likely to continue doing so in the future, all else equal.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 54 (2007)
Issue (Month): 4 (May)
Pages: 1002-1017

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Handle: RePEc:eee:moneco:v:54:y:2007:i:4:p:1002-1017
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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