Nowadays, it 's acquiring more and more of import the issue that policymakers face about the function played by the banking system and the function played by finance markets, in peculiar the stock market, in the growing procedure. Although non yet demonstrated the high quality mediation fiscal capital market in the procedure of growing of economic systems, the current argument is traveling towards a market-based. European states, Japan, the states Latin American reform program to increase the efficiency of fiscal markets and to make fiscal systems similar to the United States. The argument of fiscal US-style market-based system versus mediators ' German manner is complex and involves factors of institutional, historical and civilization. A system based on the fiscal markets is more efficient in traveling support for growing than a bank-based system? To try to reply should advert the ties finance and development emerging from new theories of growing and consequences analysis empirical.
In the last decennary a turning figure of empirical researches aimed at measuring the impact of fiscal variables on economic growing. All these plants both at microeconomic and macroeconomic degree attempted to supply grounds of a positive relationship between existent growing and fiscal growing. The latest empirical surveies are really legion and basically divided in three types: I ) surveies cross-country in order to verify the relationship between aggregative steps of fiscal system and growing two ) micro-econometric surveies look intoing the relationship between development of concerns, industries and fiscal system, three ) surveies that attempt to gauge the impact on the growing between different systems: based on fiscal markets or on the Bankss.
In a survey King and Levine ( 1993 ) found that high degrees of fiscal development are related in a strong mean with the highest rates of current and future income growing, accretion of physical capital and entire factor productiveness. The probe of the two writers refers some indices of development affecting fiscal intermediation.
The sample is represented by 80 states for the period 1960-1989. The consequences of this survey are extremely debated. The bounds of growing arrested developments are good known: the positive correlativity says nil about the relationship of causality between variables even if the two writers consider that they have shown such a nexus, given the positive correlativity between lagged variables of fiscal development and future growing rates. Such analysis besides is based on the premise that all states in the sample have the same economic construction and the same basic parametric quantities. From a closer point of position the econometric restrictions of these techniques are widely recognized even by the bookmans who use them ( Rajan and Zingales, 1998 ) . To get the better of these drawbacks in the hunt for causing, Levine et Al.
( 2000 ) reinvestigated the job of causality seeking to utilize econometric techniques that are non capable to the unfavorable judgments of the old work. In peculiar, they ask whether and to which extent exogenic indexs of fiscal development may act upon growing after extinguishing the job of contrary causing. Levine et Al. ( 2000 ) , in conformity with La Porta et Al. ( 1997,1998 ) , found that differences in the efficiency of the legal-contractual and accounting system are significantly correlated with indexs of fiscal intermediation and explicate the differences in fiscal systems and growing rates.
But much remains to be done in footings of empirical grounds to demo that fiscal development is a causal factor of growing and non merely an index of growing.
The 2nd type of surveies is based on empirical researches of micro-economic specifically intended to look into more item and to stipulate the causal nexus between growing and fiscal development. In peculiar, fiscal intermediation should assist companies to decide the jobs of inauspicious choice and moral jeopardy by cut downing the cost of external finance. Rajan and Zingales ( 1998 ) concept a trial placing industries most in demand of external finance on informations refering a sample of U.
S. companies and they examined whether these same industries grow comparatively faster in states with systems more fiscal developed. The intuition is that the most advanced companies that require financing the banking sector or the stock market should demo a growing rate higher than the other. Systematically with their hypothesis, and sing the same industries in states with changing grades of development of fiscal systems, the trial should show that the same industry, which requires external finance, grow faster in the state with a developed fiscal system. The two writers show, in fact, that the development of antique ante market facilitates ex station fiscal growing of the most advanced and hence, more dependent on finance outdoor.
This happens in a systematic manner for a big sample of industries and states. A bound study, highlighted by the same writers, is the premise that companies finance within the state. Therefore, merely if capital markets are non absolutely integrated in the domestic, funding can hold effects on the growing rate. The more of import of the two fiscal development steps used by the writers is the ratio of domestic recognition and equity market portion of GDP. The chief consequence is that in states with more developed fiscal systems industries that depend on external finance grow faster than industries in states where fiscal development is lower.
The 3rd type of empirical research, although a clear difference can non be made with 2nd type of work, is analyzing whether and to what extent the banking sector and stock markets promote economic growing in different ways.
Which of these systems can advance more growing? Are these alternate or complementary?
Levine and Zervos ( 1996 ) look into the function of fiscal sector for 42 states over the period 1976-1993. They used specifics liquidity ratios that showed variableness between states. In item, approximately developed states they reveal much high variableness for states like Switzerland, United States, United Kingdom, Japan and Israel, while much lower for states like Italy and Spain. Levine and Zervos include these indices in their arrested developments together with those of banking ( private recognition / GDP ) after commanding for other growing factors, to find whether these steps of liquidness of the stock market in add-on to those already known in brokering influence growing. The consequences reveal that the initial coefficients degrees of turnover ratio and the traded value ratio is statistically important and positively correlated with future growing ( the following 18 old ages ) of income, capital and productiveness.
Their decision is that markets provide extra services indispensable for growing. This association is peculiarly strong for developing states.
Last, another piece of grounds comes from the literature that provides the consequences of the relationship between fiscal systems, ownership constructions and concern types of economic activity. Carlin and Mayer ( 2003 ) in the industrial sector found that fiscal systems market-oriented and with disconnected ownership constructions are associated with short-run and hazardous R & A ; D.
While, fiscal system bank-oriented with concentrated ownership in developed states appear to be associated with industries that are besides turning, nevertheless, are dominated by funding longer term undertakings but in nature imitative. On the other manus, Tadesse ( 2000 ) said that the laterality of a system over the other depends chiefly from the contracts system of the state and from the badness of bureau jobs. A decision is about obvious, that the fiscal market is more efficient in promote concern growing in developed fiscal systems. The most interesting consequence is the relationship between fiscal architecture of the system and construction of the endeavors. A state with little production-based concerns benefits most from a fiscal construction based on the banking system.
The last would hold a comparative advantage in supplying fiscal services to smaller houses, particularly in those economic systems with institutional substructure that prevent little and average endeavors entree to fiscal markets.
In decision, we can hold with Levine ( 2002, p. 419 ) when he says that “overall fiscal development encouragements industry growing and new house formation” but we disagree when he says that “having a bank-based or market-based fiscal system does non count much” . In fact, the comparative effectivity of a peculiar type of fiscal system ( bank-based or market-based ) can non be established by itself but must be connected with the specific features of a state comparative to its contractual system, the information construction of houses, and particularly its degree of development engineering. This derives from the major map of fiscal markets: the information feedback that requires decisive support of a solid contractual-legal and transparent system. States, that have a weak legal and institutional construction and are besides characterized by production companies of little size, are more deprived in following a market system.
In these fortunes, a bank-based system would be more appropriate because Bankss in absence of effectual legal warrants would utilize their power to support their involvements. Tadesse ( 2002, p.450 ) gives us the decision that “the grounds suggests that fiscal architecture, in and of itself, could be a beginning of value” .
