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Financial development, structure and growth: new data, method and results

By Kul Luintel, Mosahid Khan, Roberto Leon-Gonzalez and Guangjie Li

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

Topics: HG Finance
Publisher: Elsevier
Year: 2016
DOI identifier: 10.1016/j.intfin.2016.04.002
OAI identifier: oai:http://orca.cf.ac.uk:89893
Provided by: ORCA
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