Why do French civil-law countries have higher levels of financial efficiency?

Simplice A., Simplice (2011): Why do French civil-law countries have higher levels of financial efficiency?

Abstract

The dominance of English common-law countries in prospects for financial development in the legal-origins debate has been debunked by recent findings. Using exchange rate regimes and economic/monetary integration oriented hypotheses, this paper proposes an “inflation uncertainty theory” in providing theoretical justification and empirical validity as to why French civil-law countries have higher levels of financial allocation efficiency. Inflation uncertainty, typical of floating exchange rate regimes accounts for the allocation inefficiency of financial intermediary institutions in English common-law countries. As a policy implication, results support the benefits of fixed exchange rate regimes in financial intermediary allocation efficiency.

• Item Type: MPRA Paper
• Language: English
• Keywords: Banking; allocation efficiency; exchange rate; inflation; economic integration
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R10 - General; K - Law and Economics > K0 - General > K00 - General; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; P - Economic Systems > P5 - Comparative Economic Systems > P50 - General; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General

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