Financial Structures and Economic Outcomes: An Empirical Analysis

30 Pages Posted: 18 Jun 2013

See all articles by Tom Gole

Tom Gole

Harvard University - Faculty of Arts and Sciences

Tao Sun

International Monetary Fund (IMF)

Date Written: May 2013


This paper investigates the potential relationships between financial structures and economic outcomes. The empirical results that withstand a battery of methods suggest that some financial intermediation structures are likely to be more closely related to positive economic outcomes than others. For instance, protective financial buffers within institutions have been associated with better economic performance, and a domestic financial system that is dominated by some types of nontraditional bank intermediation or that has a high proportion of foreign banks has in some cases been associated with adverse economic outcomes, especially during the financial crisis. The results also suggest that there may be trade-offs between beneficial effects on growth and stability of some financial structures. For example, the positive association of financial buffers with growth can diminish above a certain, relatively high, threshold - a too-safe system may limit the available funds for credit and hence growth.

Keywords: Financial intermediation, Financial systems, Banking sector, International banks, financial structures, economic outcomes, fixed-effects panel estimation, financial structure, financial structures, financial system, financial systems, financial stability, financial globalization, financial sector, financial intermediation, bond, bonds, financial intermediaries, financial economics, deposit rate, financial market, financial sector development, domestic financial system, financial markets, financial services, stock market, financial instability, financial institutions, stock markets, money market mutual funds, financial dependence, international finance, financial policies, stock market liquid

JEL Classification: C33, F65, G18

Suggested Citation

Gole, Tom and Sun, Tao, Financial Structures and Economic Outcomes: An Empirical Analysis (May 2013). IMF Working Paper No. 13/121. Available at SSRN:

Tom Gole (Contact Author)

Harvard University - Faculty of Arts and Sciences ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Tao Sun

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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