Second, this paper links to the financial structure literature. Related to the finance and growth literature, arguments have been made in favor of either bank- or market-based financial systems.<sup>3</sup> Recent papers have shown systemic patterns in the rise of different segments of the financial system in the process of economic and financial development (De la Torre, Feyen and Ize, 2013). Mortgage finance systems can be financed both through bankbased channels, i.e. retail funding, and more market-based channels, e.g. wholesale funding through securitization of mortgage loans. However, the development of mortgage finance systems might also depend on the scale and income level of its host economy. We will explore the “income elasticity” of mortgage finance, the relative importance of different funding sources for the depth and penetration of mortgage finance across countries, and how the development of housing finance co-varies with the development of other segments of the financial system.

Third, the paper links to the literature on determinants of financial sector development. Theory has shown the importance of macroeconomic stability and strong contractual and informational frameworks for financial deepening as they help mitigate market frictions related to maturity transformation and information asymmetries. Cross-country comparisons have established a strong empirical relationship between low inflation, strong and effective legal systems, comprehensive accounting and auditing standards, and credit registries, on the one hand, and deep and stable financial systems, on the other hand (e.g., Levine, Loayza and Beck, 2000; Boyd, Levine, and Smith, 2001, Djankov, McLiesh and Shleifer, 2007). Theory predicts that these elements should be even more important for mortgage finance given its long-term nature. In our empirical analysis, we relate the depth and breadth of mortgage finance markets to these different country factors.

Finally, the paper links to recent work on benchmarking financial systems. On the more conceptual side, Beck and de la Torre (2007) and Barajas et al. (2013) have developed the access possibilities frontier and the financial possibilities frontier, respectively, as a conceptual framework to gauge the constrained optimal level of financial development and prioritize different policy areas. On the empirical side, Beck et al. (2008) propose a benchmarking model to derive the “natural” level of financial sector depth across different dimensions and for a broad cross-section of countries, a model that by now has been mainstreamed into World Bank operations. This benchmarking exercise has been extended as more and more financial sector data have become available, both across more segments of the financial sector as well as over more dimensions of financial sector development, most recently on financial outreach. This paper provides a benchmarking exercise for mortgage finance for both depth and penetration in the housing finance market.

To the best of our knowledge, this is the first paper to present cross-country data on the depth and breadth of mortgage finance systems for such a large number of countries. With the initial nature of the exercise, however, come several caveats. First, while we have panel data on mortgage debt to GDP for part of our cross-sectional sample, there is only one data point in time for the housing loan penetration data. Future updates of the Global Findex data will

> 3 See, among others, Beck and Levine (2002).

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