Type of the Lithuanian financial system

Abstract

Interest in determining type of the financial system and investigation of its influences emerged in the end of sixties, when Goldsmith raised a hypothesis, that structure of financial system has influence on growth. Later the scope of investigation widened and now along with growth topic includes influence of the type of financial system on financial stability, culture, juridical system of a country. Fostering financial stability is a complex process, which scope is wider than applying solely monetary and fiscal policies in a country. In this respect particular attention should be paid to financial stability of monetary financial institutions, as well as reputation and competence of their management. Type of financial system, namely bank-based and market-based, determines major financial institutions, stability of which is crucial for a country’s financial system. Type of country’s financial system must be determined to equip financial supervisors with more efficient decision-making tools. Quantitative criteria of the type of financial system is proposed in this paper. Type of Lithuanian financial system is determined based on proposed criteria and on comparative analysis with developed countries, which have established types of financial system.