The Evolving Importance of Banks and Securities Markets

Asli Demirguc-Kunt, Erik Feyen, Ross Levine

NBER Working Paper No. 18004
Issued in April 2012
NBER Program(s):Corporate Finance, Economic Fluctuations and Growth, International Finance and Macroeconomics

This paper examines the evolving importance of banks and securities markets during the process of economic development. We find that as countries develop economically, (1) the size of both banks and securities markets increases relative to the size of the economy, (2) the association between an increase in economic output and an increase in bank development becomes smaller, and (3) the association between an increase in economic output and an increase in securities market development becomes larger. The results are consistent with theories predicting that as economies develop, the services provided by securities markets become more important for economic activity, while those provided by banks become less important.

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Document Object Identifier (DOI): 10.3386/w18004

Published: Asli Demirgü�-Kunt & Erik Feyen & Ross Levine, 2013. "The Evolving Importance of Banks and Securities Markets," World Bank Economic Review, World Bank Group, vol. 27(3), pages 476-490. citation courtesy of

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