We test whether more developed financial systems are better at tackling asymmetric information proxied by firm age and size. Comparing the growth effect of financial development (FD) across firms of different type, we find that FD disproportionately fosters the growth of young companies, while...

A bank’s interest expenses are found to increase with its degree of internationalization as proxied by its share of foreign liabilities in total liabilities or a Herfindahl index of international liability concentration, especially if the bank is performing badly. Our benchmark estimation...

We model the interaction between two economies where banks exhibit both adverse selection and moral hazard and bank regulators try to resolve these problems. We find that liberalizing bank capital flows between economies reduces total welfare by reducing the average size and efficiency of the...

This paper analyses cooperation among national supervisors in the decision to close a multinational bank. The supervisors are asymmetrically informed and exchange information through ’cheap talk’. It is assumed that they consider domestic welfare only. We show that: (1) the supervisors will...

We use portfolio theory to quantify the efficiency of state-level sectoral patterns of production in the United States. On the basis of observed growth in sectoral value added output, we calculate for each state the efficient frontier for investments in the real economy, the efficient Sharpe...

We use portfolio theory to quantify the efficiency of state-level sectoral patterns of production in the United States. On the basis of observed growth in sectoral value-added output, we calculate for each state the efficient frontier for investments in the real economy. We study how rapidly...

We analyze the impact of financial crises and monetary policy on the supply of wholesale funding liquidity, and also on the compositional supply effects through cross-border and relationship lending. For empirical identification, we draw on the proprietary bank-to-bank European interbank dataset...

This Paper investigates the determinants of the takeover of a foreign bank by a domestic bank whereby the former becomes a branch of the latter. Each bank is initially supervised by a national agency that cares about closure costs and deposit insurance payouts, and may decide the early closure...

The EU deposit insurance directive requires member states to maintain deposit insurance with a minimum insured amount of 20,000 euros. This paper reviews the rationale for international coordination of deposit insurance policies. For international externalities of deposit insurance policies to...

We analyze contagious sovereign debt crises in financially integrated economies. Under financial integration banks optimally diversify their holdings of sovereign debt in an effort to minimize the costs with respect to an individual country's sovereign debt default. While diversification...