Research on the Relationship between the Structure of Financial System and Economic Development

Abstract

This empirical study analyzes the implications of financial structure (bank-based versus market-based systems) for country's economic development. In recent years a considerable attention is paid to this issue in the scientific literature, however, there is a lack of empirical studies on this issue, especially investigating the relationship between the structure of financial system and economic development. The aim of this paper – to investigate empirical link between the structure of financial system and economic development.The research results show that the development level of both banking sector and financial markets is higher in countries where higher GDP per capita level is observed, however financial markets become more relevant in the process of capital accumulation. Based on the research results there can be stated that the relationship between the structure of financial system and economic development exists, i.e. the level of country's economic development is higher in countries with market-based financial system. There also can be stated that countries those can be characterized by mixed and market-based financial systems are better economic developed.