Financial Infrastructure, Group Interests, and Capital Accumulation: Theory, Evidence, and Policy

By Biaggio Bossone, Sandeep Mahajan, Farah Zahir

February 28, 2003

Preview Citation

Format: Chicago

Biaggio Bossone, Sandeep Mahajan, and Farah Zahir. Financial Infrastructure, Group Interests, and Capital Accumulation: Theory, Evidence, and Policy, (USA: International Monetary Fund, 2003) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This study presents a theory of financial infrastructure - or the set of rules, institutions, and systems within which agents carry out financial transactions. It investigates the effects of financial infrastructure development on financial architecture and real capital accumulation, taking into account financial-sector special interests. It shows that a more developed infrastructure promotes financial market growth, reduces the scope of traditional banking, and helps investors make more efficient investment decisions. The theory presented explains why traditional banking predominates in the early stages of economic development and becomes relatively less important as the economy develops, and why banks may retard financial sector development. The study provides evidence in support of its predictions.

Subject: Banking, Financial market infrastructure, Financial sector development, Infrastructure, Stocks

Keywords: Banking sector, Comparative advantage, Financial system, Interest rate, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/024
Stock No:

WPIEA0242003
ISBN:

9781451844160
ISSN:

1018-5941

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