Private-Sector Financial Liabilities in Advanced Economies: Is More Better?

Author/Editor:

Man-Keung Tang

Publication Date:

May 1, 2007

Electronic Access:

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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:

Advanced economies have been experiencing diverse developments in accumulation of financial liabilities by their household and corporate sectors since around 1995. Crosscountry- industry evidence indicates that the type of the financial system and the degree of labor market flexibility matter for the economic impact of expanded borrowings. Especially in countries with a more arm's length-based financial system and less rigid labor market, faster creation of corporate liabilities in recent years appears to have spurred growth of industries more reliant on external finance, and strengthened the development of growing industries. The findings suggest an association of recent increases in corporate borrowings with a reduction in costs of external finance and improvement in resource allocation-two supposed channels through which finance facilitates growth.

Series:

Working Paper No. 2007/118

Subject:

Financial sector development Labor market flexibility Labor markets Productivity Real interest rates

English

Publication Date:

May 1, 2007

ISBN/ISSN:

9781451866827/1018-5941

Stock No:

WPIEA2007118

Pages:

30

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