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The Evolving Importance of Banks and Securities Markets

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  • Asli Demirgüç-Kunt
  • Erik Feyen
  • Ross Levine

Abstract

The roles of banks and securities markets evolve during the process of economic development. As countries develop economically, (1) the size of both banks and securities markets increases relative to the size of the economy, (2) the association between an increase in economic output and an increase in bank development becomes smaller, and (3) the association between an increase in economic output and an increase in securities market development becomes larger. These findings are consistent with theories predicting that as economies develop, the services provided by securities markets become more important for economic activity, whereas those provided by banks become less important. Copyright 2013, Oxford University Press.

Suggested Citation

  • Asli Demirgüç-Kunt & Erik Feyen & Ross Levine, 2013. "The Evolving Importance of Banks and Securities Markets," The World Bank Economic Review, World Bank, vol. 27(3), pages 476-490.
    • Handle: RePEc:oup:wbecrv:v:27:y:2013:i:3:p:476-490
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    References listed on IDEAS

    as
    1. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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