What determines Financial Development? Culture, Institutions, or Trade
Type
conference paper
Date Issued
2007-06-29
Author(s)
Abstract
This paper endeavours to explain the vast differences in the size of capital markets across countries, by drawing together theories emphasising cultural values, dysfunctional institutions, or impediments to trade as obstacles to financial development. To account for endogeneity, instrumental variables pertaining to culture, geography, and colonial history are employed. We find that trade openness and institutions constraining the political elite from expropriating financiers exhibit a strong positive effect on the size of capital markets. Conversely, cultural beliefs and the cost of enforcing financial contracts seem not to introduce significant obstacles for financial development.
Language
English
HSG Classification
contribution to scientific community
Refereed
No
Publisher
DEGIT
Start page
012
End page
033
Pages
22
Event Title
12th Dynamics, Economic Growth, and International Trade (DEGIT) Conference
Event Location
Melbourne
Event Date
29.-30.06.2007
Subject(s)
Eprints ID
235938