The Evolving Importance of Banks and Securities Markets

27 Pages Posted: 14 Jun 2012

See all articles by Asli Demirgüç-Kunt

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Erik Feyen

World Bank - Finance & Markets Global Practice; Ahead Analytics Inc

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: April 7, 2012

Abstract

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.

Keywords: Financial development, economic development, banks, capital markets, financial structure

JEL Classification: G1, G2, O16

Suggested Citation

Demirgüç-Kunt, Asli and Feyen, Erik H. B. and Levine, Ross Eric, The Evolving Importance of Banks and Securities Markets (April 7, 2012). Available at SSRN: https://ssrn.com/abstract=2083622 or http://dx.doi.org/10.2139/ssrn.2083622

Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
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Erik H. B. Feyen (Contact Author)

World Bank - Finance & Markets Global Practice ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
+1 (202) 458 2038 (Phone)
+1 (202) 522 3184 (Fax)

Ahead Analytics Inc ( email )

Washington, DC
United States

HOME PAGE: http://www.aheadanalytics.com

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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