This paper identifies two types of market failures. The first concerns a coordination problem associated with panics. The problem in analysing this type of market failure from a policy perspective is that there is no widely accepted method for selecting equilibria. The second market failure...

In this paper, we examine the empirical link between the structural characteristics of the financial system and financial crisis. We find that there is a significant short-term reversal in development of the banking sector and stock market during both bank crises and market crashes, with the...

Traditionally, financial systems have been bank-based or market-based. The efficiency properties of these systems are compared in various dimensions. These include risk sharing, information provision, funding new industries, corporate governance, and law, finance and politics. Both systems have...

Financial intermediaries and markets can alleviate market frictions through producing information and risk sharing in different ways. In practice, the structure of financial systems can be bank-based or market-based, varying across countries. The influence of financial structure on economic...