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The changing landscape of financial market in Europe, the United States and Japan Michiel Bijlsma, Gijsbert Zwart CPB Netherland Bureau for Economic Policy.

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Presentation on theme: "The changing landscape of financial market in Europe, the United States and Japan Michiel Bijlsma, Gijsbert Zwart CPB Netherland Bureau for Economic Policy."— Presentation transcript:

1 The changing landscape of financial market in Europe, the United States and Japan Michiel Bijlsma, Gijsbert Zwart CPB Netherland Bureau for Economic Policy Analysis based on DP available at and

2 Motivation Supposed relation between financial market structure (market-based versus bank-based) and growth or stability – More R&D and innovation in equity financed markets – Bank-based financing more stable through the cycle, but suffers more in banking crisis – Market-based financing spare tire during crisis, but may be more volatile But analysis should start with classification

3 Motivation Bank-based EU versus market-based US oversimplifies reality Differences in financial sector structure within europe large Indicators used are low-dimensional Financial sector structure is changing What are meaningful indicators of financial market structure?

4 Indicators in the paper Data on 23 indicators related to – Bank-intermediated credit – Market intermediated credit – Consumer finances – Structure of the banking sector Paper is mostly descriptive

5 Data sources Combine data from multiple sources – BIS – IMF – National Central Banks – ECB – OECD – EVCA yearbooks, NVCA – UNCTAD – Eurostat – Bankscope

6 Method Principal components analysis – Find linear combinations of dimensions that explain the largest amount of variance – Issue: using multiple correlated variables biases the principal components Group countries – Define distance measure, choose number of groups – Simple choice: K-means clustering – Issue: grouping may depend on measure

7 Method To group countries, we used the following indicators

8 Results

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19 Conclusions Difference in financial market structure large within Europe One-dimensional indicators do not suffice PCA combined with clustering gives intuitive classification Market-based countries can have large banks Further research – relation with real economy – Changes over time


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