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In a series of recent papers, Mark Roe and Lucian Bebchuk have developed further the concept of path dependence, combined it with concepts of evolution and used it to challenge the wide-spread view that the corporate governance systems of the major advanced economies are likely to converge towards the economically best system at a rapid pace. The present paper shares this skepticism, but adds several aspects which strengthen the point made by Roe and Bebchuk. The present paper argues that it is important for the topic under discussion to distinguish clearly between two arguments which can explain path dependence. One of them is based on the role of adjustment costs, and the other one uses concepts borrowed from evolutionary biology. Making this distinction is important because the two concepts of path dependence have different implications for the issue of rapid convergence to the best system. In addition, we introduce a formal concept of complementarity and demonstrate that national corporate governance systems are usefully regarded as – possibly consistent – systems of complementary elements. Complementarity is a reason for path dependence which supports the socio-biological argument. The dynamic properties of systems composed of complementary elements are such that a rapid convergence towards a universally best corporate governance systems is not likely to happen. We then proceed by showing for the case of corporate governance systems shaped by complementarity, that there even is the possibility of a convergence towards a common system which is economically inferior. And in the specific case of European integration, "inefficient convergence" of corporate governance systems is a possible future course of events. First version December 1998, this version March 2000.
Recent empirical studies on the inflation-growth-relationship underline that inflation has negative growth effects already under relatively modest rates. Most contributions to monetary growth theory, however, have difficulties in explaining such a pattern. It is shown in this paper that this problem can be overcome by establishing a link between monetary instability and the aggregate elasticity of factor substitution. Several microeconomic justifications can be found for a negative influence of inflation on factor substitution. It turns out that already in a simple neoclassical monetary growth model this effect is usually strong enough to question the superneutrality benchmark result in the steady state and to dominate all potential positive effects of inflation along the convergence path. In a more general perspective the paper contributes to a better integration of institutional change in aggregate models of economic growth.
This paper provides an overview of conceptual issues and recent research findings concerning the structure and the role of financial systems and an introduction into the new research area of comparative financial systems. The authors start by pointing out the importance of financial systems in general and then sketch different ways of describing and analysing national financial systems. They advocate using what they call a “systemic approach”. This approach focuses on the fit between the various elements that constitute any financial system as a major determinant of how well a given financial system performs its functions. In its second part the paper discusses recent research concerning the relationships between financial sector development and general economic growth and development. The third part is dedicated to comparative financial systems. It first analyses the similarities and, more importantly, the differences of the financial systems of major industrialised countries and points out that these differences seem to remain in existence in spite of the current wave of liberalisation, deregulation and globalisation. This leads to the concluding discussion of what the systemic approach suggests with respect to the question of whether the financial systems of different countries are likely to converge to a common structure. Key words: Financial sector, financial system, growth and development, convergence JEL classification: G32, G34, G38