A Welfare Comparison of the German and U.S. Financial Systems
Rodney L White Center for Financial Research Working Paper 13-94
Posted: 6 Jan 1999
Date Written: May 12, 1994
There is a wide variation in the structures of financial systems in different countries. We compare two idealized polar extremes. In one, which we refer to as the "German model," banks and other intermediaries predominate. In the other, which we refer to as the "U.S. model," financial markets play the major role. On the household side, we consider issues such as inter-generational and cross- sectional risk sharing, noise suppression and the provision of services. On the firm side, we consider the allocation of investment, the market for corporate control, the market for internal funds, incentives, monitoring and long term relationships and diversity of opinion.
JEL Classification: G21
Suggested Citation: Suggested Citation