In this paper, we discuss pros and cons of different models for financial market regulation and supervision and we present a proposal for the re-organisation of regulatory and supervisory agencies in the Euro Area. Our arguments are consistent with both new theories and effective behaviour of...

We analyze a standard environment of adverse selection in credit markets. In our environment, entrepreneurs who are privately informed about the quality of their projects need to borrow from banks. Conventional wisdom says that, in this class of economies, the competitive equilibrium is...

We consider the agency problem of a staff member managing microfinancing programs, who can abuse his discretion to embezzle borrowers' repayments. The fact that most borrowers of microfinancing programs are illiterate and live in rural areas where transportation costs are very high make staff's...

Given $n$ independent replicates of a jointly distributed pair $(X,Y) \in {\cal R}^d \times {\cal R}$, we wish to select from a fixed sequence of model classes ${\cal F}_1, {\cal F}_2, \ldots$ a deterministic prediction rule $f: {\cal R}^d \to {\cal R}$ whose risk is small. We investigate the...

In some markets, such as the market for drugs or for financial services, sellers have better information than buyers regarding the matching between the buyer's needs and the good's actual characteristics. Depending on the market structure, this may lead to conflicts of interest and/or the...

This paper studies equilibria for economies characterized by moral hazard (hidden action), in which the set of contracts marketed in equilibrium is determined by the interaction of financial intermediaries. The crucial aspect of the environment that we study is that intermediaries are restricted...

We argue that the main barrier to an integrated international interbank market is the existence of asymmetric information between different countries, which may prevail in spite of monetary integration or successful currency pegging. In order to address this issue, we study the scope for...

We analyze a standard environment of adverse selection in credit markets. In our environment, entrepreneurs who are privately informed about the quality of their projects need to borrow in order to invest. Conventional wisdom says that, in this class of economies, the competitive equilibrium is...

This paper proposes a managerial control tool that integrates risk in efficiency measures. Building on existing efficiency specifications, our proposal reflects the real banking technology and accurately models the relationship between desirable and undesirable outputs. Specifically, the...

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...