Effects of Financial System Size and Structure on the Real Economy: What do we know and what do we not know?

This paper reviews the banking and finance literature and seeks to summarize the current state of knowledge on the relationship between financial system characteristics and real economic outcomes. A particular focus is the influence that these characteristics (financial system size, financial market concentration, system diversity, size of institutions, type and mandate of financial institutions) have on outcomes such as access to finance by firms, the cost of finance, financial stability and the provision of sustainable finance.