The Evolving Importance of Banks and Securities Markets
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.
We received very helpful comments from Thorsten Beck, Norman Loayza, Yona Rubinstein, seminar participants at the World Bank's June 16, 2011 conference, "Financial Structure and Economic Development," and three anonymous referees. Mauricio Pinzon Latorre provided outstanding research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Asli DemirgÃ¼ï¿½-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