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Kiel Advanced Studies Working Papers, IfW >
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http://hdl.handle.net/10419/27022
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| Title: | | Finance for growth: does a balanced financial structure matter?  |
| Authors: | | Cuadro-Sáez, Lucía García-Herrero, Alicia |
| Issue Date: | | 2007 |
| Series/Report no.: | | Kiel advanced studies working papers 445 |
| Abstract: | | In this paper we explore empirically a long-standing question in the literature on finance for growth, namely whether the financial structure -in terms of the size of the banking system relative to the capital market- matters for economic growth. We build upon the existing literature by constructing a new measure of the balancedness of the financial structure which is broader, as it includes the domestic bond market as well as external sources of financing. It is also bounded and more linear than existing ones. We find that a more balanced financial structure -in terms of the size of banks relative to the capital markets- is associated with higher economic growth. Such finding points to banks and capital markets being more of a complement than a substitute. This is in line with Greenspan's idea of one market serving as spare wheel of the other. |
| Subjects: | | financial structure banking system capital market economic growth |
| JEL: | | O16 G15 G21 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Kiel Advanced Studies Working Papers, IfW
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