Convergence of European financial system: Single financial space?
This paper tests the extent to which convergence has been occurring between EU member states in the sources of funding for investment by non-financial corporations. The evidence from time series on 9 EU member countries during 1971-1996 suggests that bank lending (credit) remains the most important source of external financing, although internal financing is increasing in importance. There is also evidence of convergence amongst the financial systems of the 9 EU member countries, for which data were readily available, and a shift from bank financing to direct financing in response to the financial liberalisation in the 1980's (securitisation). These findings suggest an evolving single financial space in Europe.
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