Bank-based economies struggle more during recoveries: IMF paper
An International Monetary Fund paper published on Monday finds evidence that market-based economies experience significantly and durably stronger rebounds than the bank-based ones following a recession.
The paper's authors, Julien Allard and Rodolphe Blavy, use a sample of 84 economic crises in 17 advanced economies between 1960 and 2007 to examine whether an economy that is bank-based or market-based matters for its ability to recover from economic crises.
The results suggest that, among advanced countries, market-based economies recover significantly faster than bank-based economies, in particular those based in continental Europe. The authors show that market-based economies are associated with a gain in cumulative economic growth of 0.4 to 0.7 percentage points on average after a year of recovery, and of 0.8 to 1.4 percentage points two years into the recovery.
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