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

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Douglas M. Gale

New York University (NYU) - Department of Economics

Date Written: May 12, 1994

Abstract

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

Allen, Franklin and Gale, Douglas M., A Welfare Comparison of the German and U.S. Financial Systems (May 12, 1994). Rodney L White Center for Financial Research Working Paper 13-94. Available at SSRN: https://ssrn.com/abstract=5448

Franklin Allen (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Douglas M. Gale

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
(212) 998-8944 (Phone)
(212) 995-3932 (Fax)

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