Debt and net financial wealth: a comparative analysis for some European countries

Cinquegrana, Giuseppe (2010): Debt and net financial wealth: a comparative analysis for some European countries.

Abstract

The impact of the different financial frameworks on the long-run growth is one of the most debated arguments in the economic theory. In this paper we present a theoretical and empirical analysis of the financial systems which characterize the financial interrelation in some European countries: the bank oriented model and the market oriented one. The first one was developed during the last part of the nineteenth century in the countries where the court system was based on the civil law principles, the other one became the financial model for the countries historically characterized by a regulatory framework with the common law approach. Considering the financial accounts of some European countries (source: EUROSTAT data, OECD data), we calculate the Goldsmith’s ratios and other indicators for the period 2000-2008. For each considered country as regard to the European Monetary Union, first of all we asses the financial interrelation and intermediation and then we analyze the debt and the net financial wealth of the private non financial sector and of the Households one.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial framework, civil law, common law, bank and market oriented, financial accounts, Goldsmith’s ratios.
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

References

Aghion P., Bolton P. (1992) , An Incomplete Contracts Approach to Financial Contracting, Review of Economic Studies, 59:473-494; Amable B, Chatelain, J-B (2001) , Can Financial Infrastructure Foster Economic Growth?, Journal of Development Economics, 64, 481-498; Aghion P, Howitt, P., Mayer Foulkes (2003) , The Effects of Financial Development on Convergence, Theory and Evidence, Working Paper, Department of Economics, Harvard University, mimeo; Basel Committee on Banking Supervision, (2010), Basel II and Revisions to the Capital Requirements Directive, Remarks by Stefan Walter, Secretary General, Basel Committee on Banking Supervision, to the European Parliament Committee on Economic and Monetary Affairs on the BCBS's reform programme, May. Basel Committee on Banking Supervision, (2010), The Basel Committee and Regulatory Reform, Remarks of Nout Wellink Chairman, Basel Committee on Banking Supervision, President, De Nederlandsche Bank, Institute of International Finance 2010 Spring Meeting Vienna, Austria, June. Basel Committee on Banking Supervision, (2010), Group of Governors and Heads of Supervision announces higher global minimum capital standards, 12 settembre. Beck T., Demirgüç-Kunt A. Levine R. (2003) , Law, Endowments and Finance, Journal of Financial Economics, 70: 137-181; Beck T., Demirgüç-Kunt A. Levine R., Maksimovic V. (2000), Financial Structure and Economic Development: Firm, Industry and Country Evidence, World Bank, Policy Research Working Paper, n. 2423; Beck T., Demirgüç-Kunt A. Levine R., Maksimovic V. (2005), Financial and Legal Constraints to Growth: Does Firm Size Matter ?, Journal of Finance, 60:137-177; Besanko D., Thakor A.V. (1987) , Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Markets, International Economic Review, 28:671-689; Bernanke B, Gertler M. (1990), Financial Fragility and Economic Performance, Quarterly Journal of Economics, 103: 87-114; Bencivenga V., Smith, B., Starr R. (1996), Equity markets, Transations Costs and Capital Accumulation: An Illustration, World Bank Economic Review, 10, 241-65; Boot, A. e Thakor A. (1997) , Financial System Architecture, Review of Financial Studies, 10, 693-733; Capelle-Blancard G., Couppey-Souberyan J. Soulat L., (2006), The measurement of financial intermediation in Japan, in "Japan and the World Economy 20, 1 (2008) 40-60", Demirgüç-Kunt A., Maksimovic V. (1998), Law, Finance and Economic Growth, Journal of Finance, 53:2107-2137; COM/STD/DAF(2010)11 15 Demirgüç-Kunt A., Maksimovic V. (1999), Institutions, Financial Markets and Firm Debt Maturity, Journal of Financial Economics, 54: 295-336; Diamond D. (1984), Financial Intermediation and Delegated Monitoring, Review of Economic Studies, 51: 393-414; Fazzari M.S., Hubbard G.R., Petersen B.C. (1988), Financing Constraints and Capital Investment, Brooking Papers of Economic Activity, pp. 141-195; Hart O. (1995), Firms, Contracts and Financial Structure, Oxford University Press, Oxford; Hubbard G. R. (1998), Capital-Market Imperfections and Investment, Journal of Economic Literature, 36:193-225; Jensen, Michael (1986), Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, American Economic Review76 n. 2: 323-329; Jappelli T., Pagano M., Bianco M. (2005), Courts and Banks: Effects of Judicial Enforcement on Credit Markets, Journal of Money, Credit and Banking, 37: 223-244; Gershenkron (1962), Economic Backwardness in Historical Perspectives, Cambridge, Mass., Harvard University Press; Goldsmith, R.W. (1969), Financial Structure andDevelopment. YaleUniversity Press,NewHaven, CT. Grossman, G.M., Helpman, E. (1991), Innovation and Growth in a Global Economy, MIT Press; Gurley, J e Shaw, E. (1955), Financial Aspects of Economic Development, American Economic Review, 45, 515-538; Kaplan S.N., Zingales L. (1997), Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints, Quarterly Journal of Economics, vol. 112, pp. 169-215; Kaplan S.N., Zingales L. (2000), Investment-Cash Flow Sensitivities are not Measures of Financial Constraints, Quarterly Journal of Economics, 115: 707-712; King R.G., Levine R. (1993), Finance and Growth: Schumpeter Might Be Right, Quarterly Journal of Economics, 108: 713-737; La Porta R., Lopez-de-Silanes F., Shleifer A., Vishny R.W. (1997), Legal Determinants of External Finance, Journal of Finance, 52: 1131-1150; Porta R., Lopez-de-Silanes F., Shleifer A., Vishny R.W. (1998), Law and Finance, Journal of Political Economy, 106: 1113-1155; La Porta R., Lopez-de-Silanes F., Shleifer A., Vishny R.W. (2000), Investor Protection and Corporate Governance, Journal of Financial Economics, 58: 3-27; Levine R. (1997), Financial Development ad Economic Growth: Views and Agenda, Journal of Economic Literature, 35: 688-726; COM/STD/DAF(2010)11 16 Levine R. (1998), The Legal Environment, Banks and The Long-run Economic Growth, Journal of Money, Credit and Banking, 30:596-620; Levine R. (1999), Law, Finance and Economic Growth; Journal of Financial Intermediation, 8: 8-35; Lucas, R.E. (1988), On the Mechanics of Economic Development, Journal of Monetary Economics 22, june, 3-42; Manzocchi S., Padoan P.C., 2004, Il nesso finanza-crescita nella recente letteratura economica, in M.Bagella (a cura di) “Finanza e sviluppo economico”, Collana della Società Italiana degli Economisti, Il Mulino, Bologna, 2004; Mayer C. (1988), New issues in corporate finance, European Economic Review, Elsevier, vol. 32(5), pages 1167-1183, June; M. Miller (1977), Debt and Taxes, Journal of Finance, 32,pp.261-275; Modigliani F., M. Miller (1958), The Cost of Capital, Corporation Finance and the Theory of Investment, American Economic Review, 48, pp. 261-297; Modigliani F., M. Miller (1961), Dividend Policy, Growth and the Valuation of Shares, Journal of Business, 34, pp. 411-433; Myers S.C. (1984), The Capital Structure Puzzle, Journal of Finance, vol. 39, pp.575-592; Myers S.C., Najluf N.S. (1984), Corporate Financing and Investment Decisions when Firms have Informations that Investors do not have, Journal of Financial Economics, vol. 13, pp. 187-221; Pagano, M. (1993), Financial Markets and Growth: An Overview, European Economic Review, 37, 613-622; Petersen M., Rajan R.G. (1994), The Benefits of Lending Relationships: Evidence from Small Business Data, Journal of Finance, vol. 49, pp. 3-37; Romer, P.(1986), Increasing Returns and Long Run Growth, Journal of Political Economy,94,oct. 1002-1037; Romer, P. (1990), Endogenous Technological Change , Journal of Political Economy, 98, oct. S71-S10; Sharpe S. A. (1990), Asymmetric Information, Bank Lending and Implicit Contracts: A Stilized Model of Customer Relationship, Journal of Finance, 45: 1069-1087; Stiglitz J., Weiss A. (1981), Credit Rationing in Markets with Imperfect Information, American Economic Review, 71: 67-127; Williamson O. (1985), The Economic Institutions of Capitalism, New York, The Free Press; Williamson O. (1988), Corporate Finance and Corporate Governance, Journal of Finance, 43: 567-591; http://epp.eurostat.ec.europa.eu/ https://www.oecd.int/