We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the...

This paper presents empirical support for the existence of wealth effects in the contribution of financial intermediation to economic growth, and offers a theoretical explanation for these effects. Using GMM dynamic panel data techniques applied to study the growth-promoting effects of financial...

We study a dynamic economy where credit is limited by insufficient collateral and, as a result, investment and output are too low. In this environment, changes in investor sentiment or market expectations can give rise to credit bubbles, that is, expansions in credit that are backed not by...

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibriumdispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive investors supply them. Because of this, bubbly...

We consider the agency problem of a staff member managing microfinancing programs, who can abuse his discretion to embezzle borrowers' repayments. The fact that most borrowers of microfinancing programs are illiterate and live in rural areas where transportation costs are very high make staff's...

We use data from a randomized controlled trial conducted in 2003-2006 in rural Amhara and Oromiya (Ethiopia) to study the impacts of the introduction of micro finance in treated communities. We document that borrowing increased substantially in locations where the programs started their...

If financial deepening aids economic growth, then financial repression should be harmful. We use a natural experiment in the change in the English usury laws in 1714 to analyze the effects of interest rate restrictions. We use a sample of individual loan transactions to demonstrate how the...

The use of debt to finance risky entrepreneurial-firm projects is rife with informational and contracting problems. Nonetheless, we document widespread lending to startups in three innovation-intensive sectors and in early stages of development. At odds with claims that the secondary patent...

In the light of first-hand data from a Beninese urban household survey in Cotonou, we investigate several motives aiming to explain participation in Rotating Savings and Credit Associations. We provide anecdotal pieces of evidence, descriptive statistics, FIML regressions and matching estimates...