Product Market Competition and Financial Market Screening

Yuichiro Matsumoto ()
Additional contact information
Yuichiro Matsumoto: Graduate School of Economics, Osaka University

No 17-14, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: How are the financial market and the product market interrelated? Product market selection affects the default rate and screening incentive of financial intermediaries. In contrast to previous studies, bad screening technology implies a low interest rate and a low default rate: i.e. intermediaries are successfully repaid more often when the country has a bad screening technology. When a country has an underdeveloped financial market, then the product market is also inefficient. This product market inefficiency means that the selection effect of the market is weak. In this case, many entrepreneurs successfully enter the market. Financially underdeveloped countries suffer from low productivity not only for inefficient screening technology but also for weak product market selection. Many firms in financially developed countries tend to choose exports, merely because firms in such countries are more productive. Financially developed countries have a comparative advantage in a financially dependent sector.

Keywords: Financial Development; Default Rate; Firm Heterogeneity; Selection; International Trade (search for similar items in EconPapers)
JEL-codes: E22 E44 F12 O11 O16 O31 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2017-06
New Economics Papers: this item is included in nep-mac and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www2.econ.osaka-u.ac.jp/library/global/dp/1714.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1714

Access Statistics for this paper

More papers in Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by The Economic Society of Osaka University ().