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Bank-Based or Market-Based Financial Systems: Which is Better?

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  • Ross Levine

Abstract

For over a century, economists and policy makers have debated the relative merits of bank-based versus market-based financial systems. Recent research, however, argues that classifying countries as bank-based or market is not a very fruitful way to distinguish financial systems. This paper represents the first broad, cross-country examination of which view of financial structure is more consistent with the data. The results indicate that although overall financial development is robustly linked with economic growth, there is no support for either the bank-based or market-based view.

Suggested Citation

  • 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.
    • Handle: RePEc:wdi:papers:2002-442
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    JEL classification:

    • G0 - Financial Economics - - General
    • K2 - Law and Economics - - Regulation and Business Law
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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