Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105727
Authors: 
Ndikumana, Léonce
Year of Publication: 
2003
Series/Report no.: 
Working Paper, University of Massachusetts, Department of Economics 2003-01
Abstract: 
Does it matter for domestic investment whether a country's financial system is bank based or stock-market based? This paper posits that financial intermediation affects domestic investment notably by alleviating financing constraints, allowing firms to increase investment in response to increased demand for output. The key result is that the structure of the financial system has no independent effect on investment, in the sense that it does not enhance the response of investment to changes in output, while financial development makes investment more responsive to output growth. Consequently, rather than promoting a particular type of financial structure, countries should implement policies that reduce transactions costs in financial intermediation and enforce creditor and investor rights. This will facilitate the development of banks and stock markets, which will stimulate domestic investment.
Subjects: 
domestic investment
financial development
financial structure
bank-based systems
stock-market-based systems
Document Type: 
Working Paper

Files in This Item:
File
Size
135.41 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.