Financial Development and Household Portfolios: Evidence from Spain, the U.K. and the U.S.
Posted: 21 Apr 2007 Last revised: 14 Mar 2011
Date Written: March 19, 2009
We examine the impact of financial development on the composition of household portfolios in Spain, the U.K. and the U.S., three countries whose financial systems underwent profound changes over the past two decades and for which relevant data exist for sufficiently long time periods. We find a 'division of labour' between the indices measuring financial development and asset returns, the first affecting mainly the long-run dynamics of household portfolios and the second the short-run dynamics; both, however, in an economically reasonable way. Among the notable results pertaining to long-run dynamics, more competitive financial intermediaries are associated with a higher share of currency and deposits and a lower share of equity. For the short-run dynamics, the most important driver is stock market returns.
Keywords: Financial Development Indices, Financial Intermediaries, Household Portfolios
JEL Classification: G11, G20
Suggested Citation: Suggested Citation