Working Paper No. 121. Johan E. Eklund and Sameeksha Desai (2008). A Methodological Note on Measuring the Functional Efficiency of Capital Markets.
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.