International capital flows from rich to poor countries can be regarded as either too low (the Lucas paradox in a one-sector model) or too high (when compared with the logic of factor price equalization in a two-sector model). To resolve the paradoxes, we introduce a non-neoclassical model which...

We develop a new public domestic debt (DD) database covering 93 low-income countries and emerging markets over the 1975-2004 period to estimate the growth impact of DD. Moderate levels of non-inflationary DD, as a share of GDP and bank deposits, are found to exert a positive overall impact on...

We develop a simple framework for studying the joint distribution of banking and currency crises triggered by real shocks. Our framework illustrates the fact that bank and currency collapses are related but they are not the same thing. Studying currency and bank collapses either in isolation or...

An endogenous growth model with financial intermediation demonstrates how deposit insurance and prudential regulatory forbearance lead to banking crises and growth declines. The model assumptions are based on features of the Japanese financial system and regulation. The model demonstrates how...

This paper examines financial stability issues that arise from the increased presence of sovereign wealth funds (SWFs) in global financial markets by assessing whether and how stock markets react to the announcements of investments and divestments to firms by SWFs using an event study approach....

This paper documents global trends in bank activity, consolidation, internationalization, and financial firm conglomeration, and explores the extent to which financial firm risk and systemic risk potential in banking are related to consolidation and conglomeration. We find that while there is a...

We study how credit market deregulation and increased international financial openness have changed corporate borrowing. The evidence comes from a large panel of publicly traded firms in 38 countries over the period 1994-2002. Reforms are measured with a comprehensive new index that tracks six...

We test for the existence of a moral hazard effect attributable to official crisis lending by analyzing the evolution of sovereign bond spreads in emerging markets before and after the Russian crisis. The nonbailout of Russia in August 1998 is interpreted as an event that decreased the perceived...

Does macroeconomic data transparency-as signaled by subscription to the IMF's Special Data Dissemination Standard (SDDS)-help reduce borrowing costs in private capital markets? This question is examined using detailed data on new issues of sovereign foreign currency-denominated (U.S. dollar,...

We develop a methodology to study how the subprime crisis spills over to the real economy. Does it manifest itself primarily through reducing consumer demand or through tightening liquidity constraint on non-financial firms? Since most non-financial firms have much larger cash holding than...