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Financial Development, Structure and Growth: New Data, Method and Results

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Abstract

The existing weight of evidence suggests that financial structure (the classification of a financial system as bank-based versus market-based) is irrelevant for economic growth. This contradicts the common belief that the institutional structure of a financial system matters. We re-examine this issue using a novel dataset covering 69 countries over 1989-2011 in a Bayesian framework. Our results are conformable to the belief - a market-based system is relevant - with sizable economic effects for the high-income but not for the middle-and-low-income countries. Our findings provide a counterexample to the weight of evidence. We also identify a regime shift in 2008.

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  • Luintel, Kul B & Khan, Mosahid & Leon-Gonzalez, Roberto & Li, GuangJie, 2016. "Financial Development, Structure and Growth: New Data, Method and Results," Cardiff Economics Working Papers E2016/2, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2016/2
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    9. Li, Shuai & Zhan, Shuwei & Zhan, Shurui & Zhan, Minghua, 2023. "How does financial development change the effect of the bank lending channel of monetary policy in developing countries?—Evidence from China," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 502-519.
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    12. Guseon Ji & Daniel Sungyeon Kim & Kwangwon Ahn, 2019. "Financial Structure and Systemic Risk of Banks: Evidence from Chinese Reform," Sustainability, MDPI, vol. 11(13), pages 1-22, July.
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    More about this item

    Keywords

    Financial Structure; Economic Growth; Cointegration; Bayesian Model Averaging; Structural Breaks;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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