Resource title

Finance for growth: does a balanced financial structure matter?

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Resource description

In this paper we explore empirically a long-standing question in the literature on finance for growth, namely whether the financial structure -in terms of the size of the banking system relative to the capital market- matters for economic growth. We build upon the existing literature by constructing a new measure of the balancedness of the financial structure which is broader, as it includes the domestic bond market as well as external sources of financing. It is also bounded and more linear than existing ones. We find that a more balanced financial structure -in terms of the size of banks relative to the capital markets- is associated with higher economic growth. Such finding points to banks and capital markets being more of a complement than a substitute. This is in line with Greenspan's idea of one market serving as spare wheel of the other.

Resource author

Lucía Cuadro-Sáez, Alicia García-Herrero

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/27022

Resource license

Adapt according to the presented license agreement and reference the original author.