Does Economic Structure Determine Financial Structure?

68 Pages Posted: 16 Mar 2006 Last revised: 30 Jan 2019

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Laura Bartiloro

Bank of Italy

Xian Gu

Durham University Business School

Oskar Kowalewski

IESEG School of Management; LEM - CNRS 9221

Date Written: December 1, 2006

Abstract

In this paper, we examine the relationship between the structure of the real economy and a country's financial system. We consider whether the development of the real economic structure can predict the direction of evolution of a country’s financial structure. Using data for 108 countries, we find a significant relationship between real economic structure and financial structure. Next, we exploit shocks to the economies in India, Finland and Sweden, and South Korea and show that changes in the economic structure of a country influence the evolution of its financial system. This suggests that financial institutions and capital markets change in response to the structure of industries.

Keywords: Financial system, Real economic structures

JEL Classification: G20, O14, O16

Suggested Citation

Allen, Franklin and Bartiloro, Laura and Gu, Xian and Kowalewski, Oskar, Does Economic Structure Determine Financial Structure? (December 1, 2006). AFA 2007 Chicago Meetings Paper, Journal of International Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=891313 or http://dx.doi.org/10.2139/ssrn.891313

Franklin Allen (Contact Author)

Imperial College London ( email )

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

Laura Bartiloro

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Xian Gu

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Oskar Kowalewski

IESEG School of Management ( email )

1 Parvis de La Défense
Socle de la Grande Arche
Paris La Défense cedex, 92044
France

HOME PAGE: http://www.ieseg.fr/en/faculty-and-research/professor/?id=1740

LEM - CNRS 9221 ( email )

Lille
France

HOME PAGE: http://lem.cnrs.fr/

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