Bank- and market-oriented financial systems: fact or fiction?





Economic development, Bank finance, Market finance


Many distinguish between financial systems with a dominant role for banks and those with a dominant role for financial markets, assuming this is of great importance for economic development. The author analyses why the distinction might matter, first by investigating how bank and market finance affect economic development. A framework to analyse the financial system is then developed. Finally, a comparative analysis of two so-called bank-oriented countries (Germany and Japan) and two so-called market-oriented countries (the UK and the US) is performed to reveal whether or not there are fundamental differences between their financial systems. The evidence does not support the idea of a distinction between bank- and market-based financial systems, with all four countries showing unique characteristics.


JEL Codes: G00


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How to Cite

SCHOLTENS, B. (2013). Bank- and market-oriented financial systems: fact or fiction?. PSL Quarterly Review, 50(202).