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The origins of bank-based and market-based financial systems: Germany, Japan, and the United States


  • Vitols, Sigurt


This paper examines the historical origins of the bank-based financial systems in Germany and Japan and the market-based financial system in the US. It critically examines the "timing of industrialization" (TOI) thesis, i.e. the assertion that variation in the current structure of financial systems can be explained by differences in the timing of the "take-off" phase of industrialization. The first major claim I make is that TOI overstates both the significance of bank-based finance for the rapid industrialization of Germany and Japan and the extent to which the financial systems really were different. Second, I argue that TOI understates the importance of different patterns of state regulation, particularly starting in the 1930s, for explaining postwar differences in the financial systems. The third claim I make is that differences in financial regimes are dependent not only upon the narrow issue of financial regulation but also on the nature of the regulation of labor, including welfare regimes.

Suggested Citation

  • Vitols, Sigurt, 2001. "The origins of bank-based and market-based financial systems: Germany, Japan, and the United States," Discussion Papers, Research Unit: Economic Change and Employment FS I 01-302, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbece:fsi01302

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    References listed on IDEAS

    1. Caroline Fohlin, 1998. "Relationship Banking, Liquidity, and Investment in the German Industrialization," Journal of Finance, American Finance Association, vol. 53(5), pages 1737-1758, October.
    2. White, Eugene Nelson, 1986. "Before the Glass-Steagall Act: An analysis of the investment banking activities of national banks," Explorations in Economic History, Elsevier, vol. 23(1), pages 33-55, January.
    3. Tamaki,Norio, 1995. "Japanese Banking," Cambridge Books, Cambridge University Press, number 9780521496766.
    4. Yabushita Shiro & Inoue Atsushi, 1993. "The Stability of the Japanese Banking System: A Historical Perspective," Journal of the Japanese and International Economies, Elsevier, vol. 7(4), pages 387-407, December.
    5. Fohlin, Caroline, 1997. "Bank Structure and Growth: Insights from British and German Balance Sheets Before World War I," Working Papers 1016, California Institute of Technology, Division of the Humanities and Social Sciences.
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    Cited by:

    1. Marie-Laure Djelic & Sigrid Quack, 2006. "Rethinking Path Dependency: The Crooked Path of Institutional Change in Post-War Germany," Sciences Po publications info:hdl:2441/2b86iahfka8, Sciences Po.
    2. Till van Treeck, 2008. "The political economy debate on ‘financialisation’ – a macroeconomic perspective," IMK Working Paper 01-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Labrinidis, George, 2018. "The roots of the Euro," MPRA Paper 86560, University Library of Munich, Germany.
    4. Dima, Bogdan & Dincă, Marius Sorin & Spulbăr, Cristi, 2014. "Financial nexus: Efficiency and soundness in banking and capital markets," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 100-124.

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