This paper proposes the view that financial development and economic growth are linked through the characteristics of technology. The most obvious connection between technology and financial innovation emerges through risk-sharing. Technology is modeled as a distribution over outcomes....

This paper is an attempt to decompose the average transactions velocity of money into two or more individual velocities. When the economy-wide velocity is expressed as a weighted average of two disaggregated velocities, this provides an equation with two unknowns. The additional equation can be...

This paper studies the design of law-making and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure, defined as the socialwelfare loss that results from the regime's inability to...

We study legal restrictions on private contracting in the form of limitations on the severity of non-monetary punishments. We locate the rationale for such restrictions in externalities that parties impose on future relationships: punishments that lower an agent's future productivity may lower...

This paper examines the role of monetary policy in the presence of endogenous time preference. The framework in which this issue is addressed is a monetary model with cash-in-advance constraints and an additional trading friction that is typical of the class of “liquidity models†of...

Modern theories of government finance stress the importance of an economy’s fiscal deficits in determining the course of monetary policy. Modern growth theory stresses the role of monetary factors in economic growth. This paper explores how these two are interrelated, using a simple AK...

Evidence suggests that developing countries are more concerned with stabilizing the nominal exchange rate than developed countries. Some papers show not only that nominal exchange rates are less volatile, but also that international reserves and domestic interest rates are significantly more...

This paper characterizes, empirically, the conduct of monetary policy in a small open economy. In particular, using as a case study the Chilean inflation targeting experience, we assess the role of the exchange rate in the determination of the interest rate. We conclude that Chile has adopted...

This study sets out to develop a simplified risk premium model to explain output volatility within the economies of Asia in the immediate aftermath of the Asian financial crisis. Firms are allowed to borrow from both domestic and foreign banks, with the firms� debts being loosely...

The data across time and countries suggest that moderate-to-high inflation and inflation volatility are highly correlated. This paper examines the effect of trend inflation on the ability of the monetary authority to ensure a determinate equilibrium and macroeconomic stability in a sticky-price...