Banking crises are usually followed by a decline in credit and growth. Is this because crises tend to take place during economic downturns, or do banking sector problems have independent negative effects on the economy? To answer this question we examine industrial sectors with differing needs...

This Paper studies the determinants of mergers and acquisitions around the world during the 1990s by focusing on differences in laws and regulation across countries. We find that the volume of M&A activity and the premium paid are significantly larger in countries with better investor...

Capital flight associated with the onset of a financial crisis in a country is often accompanied by an inflow of capital associated with foreign direct investment (FDI). Our paper provides a theoretical framework for this puzzle, and draws wider conclusions on the welfare effects of foreign...

We specify several variants of a structural econometric model explaining mortgage interest rates and loan sizes simultaneously. The models are estimated by simultaneous equation methods with a sample of loan files originated from a French mortgage lender. They yield estimates of the...

In this Paper, we examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We show that such features may lead to strategic considerations in the loan extension decision and in the pricing of...

In this paper we provide an explanation for three features that characterize the Italian savings rate: by international standards, Italy is a `high-saving' country; the Italian savings rate has declined markedly in the last three decades; the correlation between saving and growth is stronger in...

We investigate the question of whether sophistication in risk management fosters banking stability. We compare a simple banking system in which an average rating is used with a sophisticated banking system in which banks are able to assess the default risk of entrepreneurs individually. Both...

Japan experienced a deep and prolonged banking crisis in the 1990s. In this Paper we attempt to identify the characteristics of companies which have the most to lose from the banks’ malaise. Using stock price data, we calculate abnormal returns of non-financial companies around significant...

This paper analyses two aspects of banking crises: the choices that banks make to passively roll over loans in default versus actively pursuing their claims; and choices by regulators to ‘punish’ passive and insolvent banks versus rescuing them. Banks may choose to roll over loans in order...

The paper studies the causes of the current financial crisis and considers proposals for mitigation and prevention of future crises. The crisis is was the product of a ‘perfect storm’ bringing together a number of microeconomic and macroeconomic pathologies. Among the microeconomic systemic...