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The evolving importance of banks and securities markets

  • Demirguc-Kunt, Asli
  • Feyen, Erik
  • Levine, Ross

This paper examines the evolving importance of banks and securities markets during the process of economic development. As economies develop, they increase their demand for the services provided by securities markets relative to those provided by banks, such that securities markets become increasingly important for future economic development. Some exploratory evidence further suggests that deviations of a country’s actual financial structure -- the mixture of banks and markets operating in an economy -- from the estimated optimal structure are associated with lower levels of economic activity.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5805.

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Date of creation: 01 Sep 2011
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Handle: RePEc:wbk:wbrwps:5805
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  1. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June.
  2. Thorsten Beck & Ross Levine, 2002. "Stock Markets, Banks, and Growth: Panel Evidence," NBER Working Papers 9082, National Bureau of Economic Research, Inc.
  3. Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," William Davidson Institute Working Papers Series 442, William Davidson Institute at the University of Michigan.
  4. Franklin Allen & Douglas Gale, 1995. "Financial markets, intermediaries, and intertemporal smoothing," Working Papers 95-4, Federal Reserve Bank of Philadelphia.
  5. Daron Acemoglu & Fabrizio Zilibotti, 1994. "Was Prometheus unbound by chance? Risk, diversification and growth," Economics Working Papers 98, Department of Economics and Business, Universitat Pompeu Fabra.
  6. repec:oup:restud:v:62:y:1995:i:4:p:541-55 is not listed on IDEAS
  7. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Funding growth in bank-based and market-based financial systems: evidence from firm-level data," Journal of Financial Economics, Elsevier, vol. 65(3), pages 337-363, September.
  8. Franklin Allen & Douglas Gale, 1999. "Diversity of Opinion and Financing of New Technologies," Center for Financial Institutions Working Papers 98-30, Wharton School Center for Financial Institutions, University of Pennsylvania.
  9. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, 04.
  10. Holmstrom, Bengt & Tirole, Jean, 1993. "Market Liquidity and Performance Monitoring," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 678-709, August.
  11. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
  12. Mathias Dewatripont & Eric Maskin, 2004. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9605, ULB -- Universite Libre de Bruxelles.
  13. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
  14. Randall Morck & Masao Nakamura, 1999. "Banks and Corporate Control in Japan," Journal of Finance, American Finance Association, vol. 54(1), pages 319-339, 02.
  15. David E. Weinstein & Yishay Yafeh, 1998. "On the Costs of a Bank-Centered Financial System: Evidence from the Changing Main Bank Relations in Japan," Journal of Finance, American Finance Association, vol. 53(2), pages 635-672, 04.
  16. Boot, Arnoud W A & Thakor, Anjan, 1995. "Financial System Architecture," CEPR Discussion Papers 1197, C.E.P.R. Discussion Papers.
  17. Bruce D. Smith & John H. Boyd, 1998. "The evolution of debt and equity markets in economic development," Economic Theory, Springer, vol. 12(3), pages 519-560.
  18. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
  19. M. Dewatripont & E. Maskin, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 541-555.
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