The standard deviations of capital flows to emerging countries are 80 percent higher than those to developed countries. First, we show that very little of this difference can be explained by more volatile fundamentals or by higher sensitivity to fundamentals. Second, we show that most of the...

We show the existence of a very short-term relationship at the daily frequency between changes in the price of a country's major commodity export price and changes in its nominal exchange rate. The relationship appears to be robust and to hold when we use contemporaneous (realized) commodity...

We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship banks gather information on their borrowers, which allows them to provide loans for profitable firms during a crisis. Due to the services they provide, operating costs...

We combine existing balance sheet and stock market data with two new datasets to study whether, how much, and why bank lending to firms matters for the transmission of monetary policy. The first new dataset enables us to quantify the bank dependence of firms precisely, as the ratio of bank debt...

This paper reexamines the classical issue of the possible trade-offs between banking competition and financial stability by highlighting different types of risk and the role of leverage. By means of a simple model we show that competition can affect portfolio risk, insolvency risk, liquidity...

We model a Systemically Important Financial Institution (SIFI) that is too big (or too interconnected) to fail. Without credible regulation and strong supervision, the shareholders of this institution might deliberately let its managers take excessive risk. We propose a solution to this problem,...

We survey the theory of banking regulation from the general perspective of regulatory theory. Starting by considering the different justifications of financial intermediation, we proceed to identify the market failures that make banking regulation necessary. We then succinctly compare how the...

The aim of this paper is to examine the pros and cons of book and fair value accounting from the perspective of the theory of banking. We consider the implications of the two accounting methods in an overlapping generations environment. As observed by Allen and Gale(1997), in an overlapping...

The financial revolution improved the British government’s ability to borrow, and thus its ability to wage war. North andWeingast argued that it also permitted private parties to borrow more cheaply and widely.We test these inferences with evidence from a London bank.We confirm that private...