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Does it matter for domestic investment whether a country's financial system is bank based or stock-market based? This … paper posits that financial intermediation affects domestic investment notably by alleviating financing constraints …, allowing firms to increase investment in response to increased demand for output. The key result is that the structure of the …
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We apply the accelerator principle to measure the functional efficiency of capital markets. We estimate the elasticity of capital with respect to output using a panel of firms across 44 countries, and compare the results with existing approaches. Furthermore, we correlate our measure with...
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