Are banks and stock markets complements or substitutes? Empirical evidence from three countries

Sheilla Nyasha and Nicholas Odhiambo

No 18926, Working Papers from University of South Africa, Department of Economics

Abstract: This paper has tested whether bank-based financial development and market-based financial developmentare complements of, or substitutes for, one another in enhancing economic growth in the USA, Brazil andKenya during the period from 1980 to 2012. These three countries represent a modest cross-section of thegeneral financial structure prevalent in many developed and developing countries. Unlike some of theprevious studies, the study employs the newly developed ARDL-Bounds-testing approach to carry out thetest. The study also employs the method of means-removed average to construct both bank-based andmarket-based financial development indices. The results of this study show that while in the USA andBrazil, bank-based and market-based financial systems complement each other in enhancingeconomic growth; in Kenya, the two financial systems seem to be substitutes rather thancomplements.

Keywords: Bank-Based Financial Development; Market-Based Financial Development; Economic Growth; Unites States of America; Brazil; Kenya (search for similar items in EconPapers)
Date: 2015-07
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Are Banks and Stock Markets Complements Or Substitutes? Empirical Evidence from Three Countries (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:uza:wpaper:18926

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