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Natural Bank Reliance

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  • Hannah L Winterberg

Abstract

The higher aggregate prevalence of loan over bond funding in Europe is not only driven by the well-documented differences in financial market settings but also strongly shaped by different firm characteristics. The European economy is more fragmented than the U.S. economy, and thus features a different firm distribution in terms of size and collateral availability. I estimate that if all European firms had access to a financial market like the U.S. market, their aggregate bond funding share would remain significantly smaller. This counterfactual suggests a limited potential for European corporate bond markets in the short and medium term.

Suggested Citation

  • Hannah L Winterberg, 2025. "Natural Bank Reliance," IMF Working Papers 2025/115, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2025/115
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