Financial Development : Structure and Dynamics

This paper analyzes the process of financial development over the last three to four decades from the perspective of the fundamental frictions (agency and collective) to which economic agents were exposed. A comprehensive statistical benchmarking analysis showed that financial development followed r...

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Main Authors:	de la Torre, Augusto, Feyen, Erik, Ize, Alain
Format:	Journal Article
Language:	en_US
Published:	Oxford University Press on behalf of the World Bank 2015
Subjects:	asset management asymmetric information boom-bust cycle capital market economic development financial development enabling environment financial structure financial system financial crisis insurance market failure
Online Access:	http://hdl.handle.net/10986/21620

id	okr-10986-21620
recordtype	oai_dc
spelling	okr-10986-216202021-04-23T14:04:03Z Financial Development : Structure and Dynamics de la Torre, Augusto Feyen, Erik Ize, Alain asset management asymmetric information boom-bust cycle capital market economic development financial development enabling environment financial structure financial system financial crisis insurance market failure This paper analyzes the process of financial development over the last three to four decades from the perspective of the fundamental frictions (agency and collective) to which economic agents were exposed. A comprehensive statistical benchmarking analysis showed that financial development followed regular dynamics that can be largely explained by the underlying frictions. In particular, the sequencing, returns to scale, and shape of the developmental paths for various types of financial activities—including public debt, banking, insurance, asset management, and capital markets—broadly matched benchmark predictions. Reflecting financial innovation and the dynamic interaction between financial and economic development, financial development paths were also found to be strongly dependent on initial conditions. At the same time, policy differences, including the failure to improve the quality of the enabling environment and prevent financial crashes (the dark side of finance), were found to explain a sizable share of the deviations of individual country paths from the benchmarks. 2015-03-19T14:03:35Z 2015-03-19T14:03:35Z 2013-09 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/21620 en_US CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Oxford University Press on behalf of the World Bank Publications & Research Publications & Research :: Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	asset management asymmetric information boom-bust cycle capital market economic development financial development enabling environment financial structure financial system financial crisis insurance market failure
spellingShingle	asset management asymmetric information boom-bust cycle capital market economic development financial development enabling environment financial structure financial system financial crisis insurance market failure de la Torre, Augusto Feyen, Erik Ize, Alain Financial Development : Structure and Dynamics
description	This paper analyzes the process of financial development over the last three to four decades from the perspective of the fundamental frictions (agency and collective) to which economic agents were exposed. A comprehensive statistical benchmarking analysis showed that financial development followed regular dynamics that can be largely explained by the underlying frictions. In particular, the sequencing, returns to scale, and shape of the developmental paths for various types of financial activities—including public debt, banking, insurance, asset management, and capital markets—broadly matched benchmark predictions. Reflecting financial innovation and the dynamic interaction between financial and economic development, financial development paths were also found to be strongly dependent on initial conditions. At the same time, policy differences, including the failure to improve the quality of the enabling environment and prevent financial crashes (the dark side of finance), were found to explain a sizable share of the deviations of individual country paths from the benchmarks.
format	Journal Article
author	de la Torre, Augusto Feyen, Erik Ize, Alain
author_facet	de la Torre, Augusto Feyen, Erik Ize, Alain
author_sort	de la Torre, Augusto
title	Financial Development : Structure and Dynamics
title_short	Financial Development : Structure and Dynamics
title_full	Financial Development : Structure and Dynamics
title_fullStr	Financial Development : Structure and Dynamics
title_full_unstemmed	Financial Development : Structure and Dynamics
title_sort	financial development : structure and dynamics
publisher	Oxford University Press on behalf of the World Bank
publishDate	2015
url	http://hdl.handle.net/10986/21620
_version_	1764448791287562240

Financial Development : Structure and Dynamics

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