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The Poor Stay Poor: Non-Convergence Across Countries and Regions

Canova, Fabio; Marcet, Albert - C.E.P.R. Discussion Papers - 1995

We study the issue of income convergence across countries and regions with a Bayesian model which allows us to use information in an efficient and flexible way. We argue that the very slow convergence rates to a common level of per-capita income found, for example, by Barro and Sala-i-Martin, is...

Persistent link: https://www.econbiz.de/10005067447

Convergence Empirics Across Economies with (Some) Capital Mobility

Quah, Danny - C.E.P.R. Discussion Papers - 1994

This paper reinterprets a simple model of growth and fluctuations across many economies to allow for the explicit characterization of the dynamically-evolving cross-economy distribution of income. Such a framework provides a more natural, revealing study of the convergence hypothesis. The data...

Persistent link: https://www.econbiz.de/10005661869

Financial Development, Property Rights and Growth

Claessens, Stijn; Laeven, Luc - C.E.P.R. Discussion Papers - 2002

This Paper investigates how the legal framework not only affects the amount of external financing available, but also firms’ resource allocation among different types of assets. Using a simple model, we show that in a weaker legal environment a firm will get less financing, and thus invest...

Persistent link: https://www.econbiz.de/10005504760

Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk

Heider, Florian; Hoerova, Marie; Holthausen, Cornelia - C.E.P.R. Discussion Papers - 2010

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow … banks to have private information about the risk of their assets. We show how banks' asset risk affects funding liquidity in …

Persistent link: https://www.econbiz.de/10008530367

Optimal Interventions in Markets with Adverse Selection

Philippon, Thomas; Skreta, Vasiliki - C.E.P.R. Discussion Papers - 2010

We study interventions to restore efficient lending and investment when financial markets fail because of adverse selection. We solve a design problem where the decision to participate in a program offered by the government can be a signal for private information. We charac terize optimal...

Persistent link: https://www.econbiz.de/10008468692

Global Imbalances and the Financial Crisis: Products of Common Causes

Obstfeld, Maurice; Rogoff, Kenneth - C.E.P.R. Discussion Papers - 2009

This paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both have their origins in economic policies followed in a number of countries in the 2000s and in distortions that influenced the transmission of these policies...

Persistent link: https://www.econbiz.de/10008557008

Theoretical Notes on Bubbles and the Current Crisis

Martin, Alberto; Ventura, Jaume - C.E.P.R. Discussion Papers - 2010

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...

Persistent link: https://www.econbiz.de/10008684673

Financial Black-Holes: The Interaction of Financial Regulation and Bailout Guarantees

Rancière, Romain; Tornell, Aaron - C.E.P.R. Discussion Papers - 2011

This paper argues that the U.S. financial crisis is a new type of crisis: a "financial black hole." Financial black holes are characterized by the breaking-up of credit market discipline and the large-scale financing of negative NPV projects. In a theoretical model, we explain how the...

Persistent link: https://www.econbiz.de/10008854497

Contingent Capital: The Case for COERCs

Pennacchi, George G.; Vermaelen, Theo; Wolff, Christian C - C.E.P.R. Discussion Papers - 2010

In this paper we propose a new security, the Call Option Enhanced Reverse Convertible (COERC). The security is a form of contingent capital, i.e. a bond that converts into equity when the market value of equity relative to debt falls below a certain trigger. The conversion price is set...

Persistent link: https://www.econbiz.de/10008677232

Crash Risk in Currency Markets

Farhi, Emmanuel; Fraiberger, Samuel P.; Gabaix, Xavier; … - C.E.P.R. Discussion Papers - 2009

How much of carry trade excess returns can be explained by the presence of disaster risk? To answer this question, we … propose a simple structural model that includes both Gaussian and disaster risk premia and can be estimated even in samples … risk premia account for about 25% of expected carry trade excess returns in advanced countries. …

Persistent link: https://www.econbiz.de/10005016245