Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 132: A Methodological Note on Measuring the Functional Efficiency of Capital Markets

Johan E Eklund () and Sameeksha Desai ()
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Johan E Eklund: JIBS and CESIS
Sameeksha Desai: Max Planck Institute of Economics

Abstract: We apply the accelerator principle to measure the functional efficiency of capital markets. We estimate the elasticity of capital with respect to output using a panel of firms across 44 countries, and compare the results with existing approaches. Furthermore, we correlate our measure with corporate governance institutions.

Keywords: Allocation of capital; accelerator principle; functional efficiency

JEL-codes: C00; G32; P00

11 pages, June 9, 2008

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