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Are modern financial systems shaped by state antiquity?

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  • James B. Ang

Abstract

We demonstrate that existing differences in financial development between countries can be explained by the cumulative variations in their levels of state experience since 1 AD. This dimension of early historical development has not been considered so far in studies that analyze the determinants of financial development. The estimation allows for all major theories established in the literature as possible explanations for the disparity of financial development across the globe. Significance of state antiquity is robust to the use of alternative indicators of financial development, the consideration of different lengths and periods of statehood, and controlling for a range of variables or country characteristics. Our results highlight the important role of statehood in propelling financial system development, and thus provide some support to the view that historically determined differences in the early-start developmental advantage provide the basis for explaining the fundamental sources of variations in financial development between countries today.

Suggested Citation

  • James B. Ang, 2013. "Are modern financial systems shaped by state antiquity?," Monash Economics Working Papers 38-13, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2013-38
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    More about this item

    Keywords

    State antiquity; Financial development;

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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