The Evolving Importance of Banks and Securities Markets
World Bank - Financial and Private Sector Development
World Bank - Financial and Private Sector Development Vice Presidency
UC Berkeley; Milken Institute; National Bureau of Economic Research (NBER)
April 7, 2012
This paper examines the evolving importance of banks and securities markets during the process of economic development. We find that as countries develop economically, (1) the size of both banks and securities markets increases relative to the size of the economy, (2) the association between an increase in economic output and an increase in bank development becomes smaller, and (3) the association between an increase in economic output and an increase in securities market development becomes larger. The results are consistent with theories predicting that as economies develop, the services provided by securities markets become more important for economic activity, while those provided by banks become less important.
Number of Pages in PDF File: 27
Keywords: Financial development, economic development, banks, capital markets, financial structure
JEL Classification: G1, G2, O16working papers series
Date posted: June 14, 2012
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