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Why do financial systems differ? History matters

  • Cyril Monnet
  • Erwan Quintin

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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File URL: http://repec.org/sed2005/up.21184.1106326578.pdf
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Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 275.

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Date of creation: 2005
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Handle: RePEc:red:sed005:275
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  1. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  2. Patrick Bolton & Xavier Freixas, 2000. "Equity, Bonds, and Bank Debt: Capital Structure and Financial Market Equilibrium under Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 324-351, April.
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  7. Mathias Dewatripont & Eric Maskin, 2004. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9605, ULB -- Universite Libre de Bruxelles.
  8. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  9. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  10. Timothy W. Guinnane, 2002. "Delegated Monitors, Large and Small: Germany's Banking System, 1800–1914," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 73-124, March.
  11. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
  12. Michie, Ranald C., 1986. "The London and New York Stock Exchanges, 1850–1914," The Journal of Economic History, Cambridge University Press, vol. 46(01), pages 171-187, March.
  13. Fohlin, Caroline, 2002. "Regulation, taxation and the development of the German universal banking system, 1884 1913," European Review of Economic History, Cambridge University Press, vol. 6(02), pages 221-254, August.
  14. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-81, September.
  15. Sylla, Richard, 1969. "Federal Policy, Banking Market Structure, and Capital Mobilization in the United States, 1863–1913," The Journal of Economic History, Cambridge University Press, vol. 29(04), pages 657-686, December.
  16. Sandeep Baliga & Ben Polak, 2001. "The Emergence and Persistence of the Anglo-Saxon and German Financial Systems," Economics Working Papers 0005, Institute for Advanced Study, School of Social Science.
  17. Ergungor, O. Emre, 2004. "Market- vs. bank-based financial systems: Do rights and regulations really matter?," Journal of Banking & Finance, Elsevier, vol. 28(12), pages 2869-2887, December.
  18. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January.
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