The large wealth and consumption inequality in the U.S. is usually attributed to two market frictions: debt constraints and incomplete markets. Recent literature has argued that debt constraints are the critical friction while market incompleteness plays only a secondary role. We evaluate the...

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....

Structural vector autoregressions (SVARs) have become a standard tool used to determine the roles of monetary policy shocks in generating cyclical fluctuations in the United States. Using both long- and short-run identifying restrictions, various authors have explored the empirical response of...

Standard theory of small open economies predicts a smooth path for consumption and investment over time, and procyclical current account balances and employment. This contrasts with the data for emerging countries, where consumption, investment and employment are highly procyclical and volatile,...

This paper examines the effects that capital inflows have on the financial system in a Diamond-Dybvig environment. Here, an adverse-selection problem arises where short-term capital has the incentive to enter the domestic banking system while long-term capital chooses to stay out. Then,...

This paper investigates whether the presence of financial frictions can help explain the differences in the variability of output and inflation between the Pre- and the Post-Volcker periods. I use a limited participation model with credit market imperfections, in which financial frictions may...

This paper examines linkage of real interest rates for a group of selected countries in East Asia. The countries under study include Japan, Korea, Singapore, Malaysia and Thailand. The long run relationship is tested and estimated using the conitegration analysis. We also have conducted the...

This paper examines stock market behaviour in India, Sri Lanka, Pakistan, and Bangladesh employing unit root tests, autocorrelation tests and spectral analysis. Evidence suggests that all markets exhibit a random walk. The multivariate cointegration tests based upon the Johansen Juselius (1988,...

Which pricing kernel restrictions are needed to make low dimensional Markov models consistent with given sets of predictions on aggregate stock-market fluctuations ? This paper develops theoretical test conditions addressing this and related reverse engineering issues arising within a fairly...

This paper assesses the effects of agency costs and asymmetric information in credit markets. Asymmetric information and agency costs occur whenever lenders delegate control over resources to borrowers, leading to adverse selection, moral hazard and monitoring costs because of the inability to...