The Impact of Bank-Based and Market-Based Financial Development on Economic Growth: Time-Series Evidence From the United Kingdom

This paper examines the dynamic impact of both bank-based and marketbased financial development on economic growth in the United Kingdom (UK) during the period 1980-2012, using the autoregressive distributed lag bounds testing approach. Given the complexity of the financial structure in the United Kingdom, various financial development indicators have been used to construct bank-based and market-based financial development indices. The empirical results of this study show that while market-based financial development has a positive impact on economic growth in the United Kingdom, bank-based financial development has a distinct negative impact. These results apply irrespective of whether the regression analysis is conducted in the long run or in the short run.