Sam Langfield, Marco Pagano, 01 February 2016

Why is growth in Europe so low? Among the contributing factors, this column highlights the role of financial structure. Intermediation in Europe is heavily bank-based, and the authors' novel empirical findings indicate that such a structure exerts a negative effect on long-run economic growth and exacerbates its response to sharp drops in real estate prices. The findings support policymakers’ efforts to rebalance financial structure towards securities markets.

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