The paper reviews the state of the economic literature on the link between nancial development and growth. We rst examine the issue of measurement of nancial development and the debate on the direction of causality between nance and growth. Next, we extensively discuss the various channels...

An algorithm for computing Dynamic Nash Equilibria (DNE) in an extended ver- sion of Kiyotaki and Wright (1989) (hereafter KW) is proposed. The algorithm com- putes the equilibrium pro?le of (pure) strategies and the evolution of the distribution of three types of assets across three types of...

We study the impact of corporate governance frictions in an economy where growth is driven both by the foundation of new firms and by the in-house investment of incumbent firms. Firms' managers engage in tunneling and empire building activities. Active shareholders monitor man- agers, but can...

Do policies that alter the allocation of human capital across individuals affect the innovation capacity of an economy? To answer this question, I extend Romer's (1990) growth model to allow for individual heterogeneity. I find that the value of an invention rises with equality. If skills and...

In this paper, I examine the transitional dynamics of an economy populated by individuals who split their time between acquiring a formal education, producing final goods, and innovating. The paper has two objectives: (i) uncovering the macroeconomic circumstances that favored the rise of formal...