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Too Cold, Too Hot, or Just Right? Assessing Financial Sector Development Across the Globe, Adolfo Barajas, Thorsten Beck, Era Dabla-Norris, Seyed Reza Yousefi

This paper introduces the concept of the financial possibility frontier as a constrained optimum level of financial development to gauge the relative performance of financial systems across the globe. This frontier takes into account structural country characteristics, institutional, and macroeconomic factors that impact financial system deepening. We operationalize this framework using a benchmarking exercise, which relates the difference between the actual level of financial development and the level predicted by structural characteristics, to an array of policy variables. We also show that an overshooting of the financial system significantly beyond levels predicted by its structural fundamentals is associated with credit booms and busts
Table Of Contents
Cover; Abstract; Contents; I. Introduction; II. The financial possibility frontier; III. Taxonomy of financial sector policies; IV. Benchmarking financial systems; V. Explaining Gaps; VI. Conclusions; Figures; 1. The Financial Possibility Frontier; 2. Observed Financial Depth Over Time and Across Income Groups; 3. Gaps in Financial Depth Relative to Benchmarks; 4. Change in Gaps in Private Credit, 1990 to 2007; 5. Share of Underperforming Countries, by Income Level; 6. Frequency of Credit Booms Related to the Level of the Private Credit
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (31 p.)
Specific Material Designation
Form Of Item

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