IDEAS home Printed from https://ideas.repec.org/a/oup/jeurec/v16y2018i1p123-160..html
   My bibliography  Save this article

Financial Consumption and the Cost of Finance: Measuring Financial Efficiency in Europe (1950–2007)

Author

Listed:
  • Guillaume Bazot

Abstract

This paper proposes a quantitative evaluation of the financial sector from 1950 to 2007 in Germany, France, the United Kingdom, and Europe more broadly. Three main facts are revealed. First, the ratio of domestic financial intermediaries’ income to GDP increases continuously in all the countries over the period, even during the 1990s and the 2000s, contrary to the national accountant evaluation. Second, comparing financial income to the quantity of intermediated assets, the analysis shows that the unit cost of financial intermediation does not decrease over the period, except in France. In addition, because European unit cost decreased after the 1990s whereas it remained stable in the United States, the unit cost increased more in the United States than in Europe over the whole period. Third, an econometric investigation shows that (i) the increase in nominal interest rates during the 1970s and the 1980s is positively correlated to unit cost and (ii) the joint development of financial wealth management, credit intermediation, and the securities industry during the 1990s and the 2000s coincides with higher unit cost values.

Suggested Citation

  • Guillaume Bazot, 2018. "Financial Consumption and the Cost of Finance: Measuring Financial Efficiency in Europe (1950–2007)," Journal of the European Economic Association, European Economic Association, vol. 16(1), pages 123-160.
  • Handle: RePEc:oup:jeurec:v:16:y:2018:i:1:p:123-160.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jeea/jvx008
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas Philippon, 2015. "Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation," American Economic Review, American Economic Association, vol. 105(4), pages 1408-1438, April.
    2. Thomas Philippon, 2016. "The FinTech Opportunity," NBER Working Papers 22476, National Bureau of Economic Research, Inc.
    3. Godechot, Olivier, 2015. "Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase in global inequality," MaxPo Discussion Paper Series 15/3, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).
    4. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    5. Böhm, Michael & Metzger, Daniel & Strömberg, Per Johan, 2018. ""Since you're so rich, you must be really smart": Talent and the Finance Wage Premium," CEPR Discussion Papers 12711, C.E.P.R. Discussion Papers.
    6. Thomas Philippon, 2014. "Efficiency and Benefit-Cost Analysis of the Financial System," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages 107-120.
    7. repec:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-017-0045-1 is not listed on IDEAS
    8. Meyer Aaron & Francisco Rivadeneyra & Samantha Sohal, 2017. "Fintech: Is This Time Different? A Framework for Assessing Risks and Opportunities for Central Banks," Discussion Papers 17-10, Bank of Canada.
    9. repec:bis:biscgf:60 is not listed on IDEAS
    10. -, 2018. "Regional digital market: Strategic aspects," Documentos de Proyectos 43633, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    11. Boustanifar, Hamid & Grant, Everett & Reshef, Ariell, 2016. "Wages and human capital in finance: international evidence, 1970-2005," Globalization Institute Working Papers 266, Federal Reserve Bank of Dallas.
    12. Nolan, Brian & Richiardi, Matteo & Valenzuela, Luis, 2018. "The Drivers of Inequality in Rich Countries," MPRA Paper 89806, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jeurec:v:16:y:2018:i:1:p:123-160.. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press). General contact details of provider: http://edirc.repec.org/data/eeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.