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Market Phoenixes and Banking Ducks Are Recoveries Faster in Market-Based Financial Systems?

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  • Mr. Julien Allard
  • Mr. Rodolphe Blavy

Abstract

Recoveries vary considerably across countries: our paper compares recoveries in bank-based and market-based economies and finds that market-based economies experience significantly and durably stronger rebounds than the bank-based ones (in particular the more bank-based economies of continental Europe). Further, stronger recoveries also tend to be associated with broader economic flexibility. Our findings suggest that dealing with bank sector vulnerabilities is paramount to support the recovery. In the medium term, structural policies to deepen financial markets are useful, but need to be complemented with structural measures to address rigidities more broadly in the real economy.

Suggested Citation

  • Mr. Julien Allard & Mr. Rodolphe Blavy, 2011. "Market Phoenixes and Banking Ducks Are Recoveries Faster in Market-Based Financial Systems?," IMF Working Papers 2011/213, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/213
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    7. Zhai, Weiyang, 2020. "Financial structure, capital openness and financial crisis," MPRA Paper 105457, University Library of Munich, Germany.
    8. Alfredo Grau & Araceli Reig, 2021. "Operating leverage and profitability of SMEs: agri-food industry in Europe," Small Business Economics, Springer, vol. 57(1), pages 221-242, June.
    9. Galanti, Sébastien & Leroy, Aurélien & Vaubourg, Anne-Gaël, 2022. "Investment and access to external finance in Europe: Does analyst coverage matter?," International Review of Financial Analysis, Elsevier, vol. 81(C).
    10. Natasha Kalara & Lu Zhang, 2018. "The changing landscape of firm financing in Europe, the United States and Japan," CPB Discussion Paper 383, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Osoro, Jared & Osano, Evans, 2014. "Bank-based versus market-based financial system: Does evidence justify the dichotomy in the context of Kenya?," KBA Centre for Research on Financial Markets and Policy Working Paper Series 10, Kenya Bankers Association (KBA).
    12. Xu Guangdong, 2021. "Reassessing the Literature on the Relationship Between Financial Structure and Economic Growth," Review of Economics, De Gruyter, vol. 72(2), pages 149-182, August.
    13. Masiak, Christian & Moritz, Alexandra & Lang, Frank, 2017. "Financing Patterns of European SMEs Revisited: An Updated Empirical Taxonomy and Determinants of SME Financing Clusters," EIF Working Paper Series 2017/40, European Investment Fund (EIF).
    14. Martin Hodula, 2018. "Off the Radar: Exploring the Rise of Shadow Banking in the EU," Working Papers 2018/16, Czech National Bank.
    15. Grjebine, Thomas & Szczerbowicz, Urszula & Tripier, Fabien, 2018. "Corporate debt structure and economic recoveries," European Economic Review, Elsevier, vol. 101(C), pages 77-100.
    16. 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.
    17. Chaibi, Hasna & Ftiti, Zied, 2015. "Credit risk determinants: Evidence from a cross-country study," Research in International Business and Finance, Elsevier, vol. 33(C), pages 1-16.
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