Effects of Financial System Size and Structure on the Real Economy: What do we know and what do we not know? provides an overview of the findings in the empirical economics and finance literature on the effects that various financial system characteristics have on real economic outcomes. Although the empirical evidence on various relationships is mixed, there appears to be relatively robust empirical evidence that: financial deepening promotes economic development only up to a certain size of financial systems relative to GDP and that ‘too much finance’ may actually harm economies; that smaller banks tend to have more stable lender-borrower relationships than large banks and that smaller banking institutions extend more credit to SMEs; that market-based banking provides less financing to the real economy than traditional banking while being more prone to financial crisis; and that more concentrated banking markets are less cost efficient.
This publication provides an opportunity for Asia and the Pacific policymakers and stakeholders, such as those from the private sector, academia and civil society organizations, to actively engage with the global negotiations, and to lay out the financing and partnership frameworks for the develo
An India Advisory Council of the UNEP India Inquiry was convened by the Federation of Indian Chambers of Commerce and Industry (FICCI).
Today’s financial system is in many ways too large, too complex, and too removed from the real economy.
This overview, followed by five supporting reports, identifies these challenges of tomorrow, points to key choices ahead, and recommends not just what needs to be reformed, but how to undertake the reforms. The overview is divided into nine chapters.