This article introduces a new database of indicators of financial structure and financial development across countries and over time. The database is unique in that it combines a wide variety of indicators that measure the size, activity, and efficiency of financial intermediaries and markets. It improves on previous efforts by presenting data on the public share of commercial banks, introducing indicators of the size and activity of nonbank financial institutions, and constructing measures of the size of bond and primary equity markets. This article introduces a new database, the first to provide comprehensive measures of the development, structure, and performance of the financial sector. This database is the first to define and construct indicators of the size and activity of nonbank financial intermediaries, such as insurance companies, pension funds, and non-deposit money banks. It is also the first to include indicators of the size of primary equity markets and primary and secondary bond markets. In constructing the database, authors carefully deflate measures and match stock and flow variables.

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A New Database on the Structure and Development of the Financial Sector

This paper reviews, appraises, and critiques theoretical and empirical research on the connections between the operation of the financial system and economic growth. While subject to ample qualifications and countervailing views, the preponderance of evidence suggests that both financial intermediaries and markets matter for growth and that reverse causality alone is not driving this relationship. Furthermore, theory and evidence imply that better developed financial systems ease external financing constraints facing firms, which illuminates one mechanism through which financial development influences economic growth. The paper highlights many areas needing additional research.

Chapter 12 Finance and Growth: Theory and Evidence

https://www.nber.org/system/files/working_papers/w9138/w9138.pdf

Bank-Based or Market-Based Financial Systems: Which is Better?

This paper examines whether there is a threshold above which …nancial development no longer has a positive eect on economic growth. We use dierent empirical approaches to show that there can indeed be "too much" …nance. In particular, our results suggest that …nance starts having a negative eect on output growth when credit to the private sector reaches 100% of GDP. We show that our results are consistent with the "vanishing eect" of …nancial development and that they are not driven by output volatility, banking crises, low institutional quality, or by dierences in bank regulation and supervision.

Too much finance

For over a century, economists and policy makers have debated the relative merits of bank-based versus market-based financial systems. Recent research, however, argues that classifying countries as bank-based or market is not a very fruitful way to distinguish financial systems. This paper represents the first broad, cross-country examination of which view of financial structure is more consistent with the data. The results indicate that although overall financial development is robustly linked with economic growth, there is no support for either the bank-based or market-based view.

http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2000/10/13/000094946_00091305311184/additional/123523322_20041117163552.pdf

Demirguc-Kunt, Asli Maksimovic, Vojislav

Papers

Funding growth in bank-based and market-based financial systems : evidence from firm level data