What can history can tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the...

This paper tells the story of how paper money evolved as a result of lending by banks. While lending commodity money requires holding large reserves of commodity money to ensure liquidity, issuing convertible paper money reduces these costs significantly. The paper also examines the possibility...

This paper is an exploration of the theory of endogenous regime changes which takes as an illustration the making of the classical gold standard. The international gold-based fixed exchange rate regime that surfaced during the 1870s has traditionally been interpreted as resulting from a mix of...

We model corporate liquidity policy and show that aggregate risk exposure is a key determinant of how firms choose between cash and bank credit lines. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms with high aggregate risk find it costly to get credit...

To identify credit availability we analyze the extensive and intensive margins of lending with loan applications and all loans granted in Spain. We find that both worse economic and tighter monetary conditions reduce loan granting, especially to firms or from banks with lower capital or...

In this paper we trace the evolution of the lender of last resort doctrine—and its implementation—from the nineteenth century through the panic of 2008. We find that typically the most influential economists “fight the last war”: formulating policy guidelines that would have dealt...

A quantitative investigation of financial intermediation in the U.S. over the past 130 years yields the following results : (i) the finance industry’s share of GDP is high in the 1920s, low in the 1950s and 1960s, and high again in the 1990s and 2000s; (ii) most of these variations can be...

We develop a method to estimate which side will win a civil war. The key insight we deliver is that, for typical sovereign debt contracts, the probability of debt repayment will equal the probability of victory in a civil war. We test our predictor for standard outcomes in civil wars, including...

We examine the first widespread use of capital controls in response to a global or regional financial crisis. In particular, we analyze whether capital controls mitigated capital flight in the 1930s and assess their causal effects on macroeconomic recovery from the Great Depression. We find...

Communal responsibility, a medieval institution studied by Greif (2006), supported the use of credit among European merchants in the absence of modern enforcement technologies. This paper shows how this mechanism helps to overcome enforcement problems in anonymous buyer/seller transactions. In a...