Comparative Analysis of the German Bank-Based and the US Market-Based Financial System: A Fuzzy-Set QCA Approach

Abstract

This study conducts a comparative analysis of the German bank-based and the US market-based financial systems, employing a Fuzzy-Set Qualitative Comparative Analysis (FsQCA) methodology to examine their respective characteristics. The findings indicate that the German bank-based financial system outperforms the US market-based model in terms of stability and economic inclusiveness. While the US financial system fosters innovation and entrepreneurship, it exhibits lower resilience to economic crises and may contribute to greater social inequalities. Conversely, the German model, characterized by long-term banking relationships and a decentralized yet well-regulated institutional framework, ensures more effective crisis management and enhanced democratic accountability. The study suggests that an optimal financial system for the European Union would integrate the stability of the German model with the dynamism of the US system. Achieving this balance necessitates strengthening the financing of the start-up ecosystem, developing a decentralized banking structure, and establishing a more coherent and adaptable regulatory framework. The results highlight the importance of incorporating elements of the German system into future financial reforms to promote sustainable and inclusive economic development.