Countries with high debt loads are vulnerable to an adverse feedback loop in which doubts by lenders lead to higher sovereign interest rates which in turn make the debt problems more severe. We analyze the recent experience of advanced economies using both econometric methods and case studies...

In the recent financial crisis, macroeconomic stimuli produced mixed results across developed economies. In contrast, China's stimulus boosted real GDP growth from an annualized 6.2% in the first quarter of 2009 trough to 11.9% in the first quarter of 2010. Amidst this phenomenal response, land...

This paper uses an asymmetric information framework to understand the causes of the recent financial crisis in Korea. It shows that the Korean data is consistent with this explanation of the crisis. It then draws on this analysis to discuss several lessons that can help guide Korean policymakers...

Every firm in a developed economy relies on the mere existence of countless other firms to keep prices competitive up and down all supply chains. Without this network externality, no firm forms; and without many firms, no network forms; locking in a low-income trap. Business group governance...

Economics has firms maximizing value and people maximizing utility, but firms are run by people. Agency theory concerns the mitigation of this internal contradiction in capitalism. Firms need charters, regulations and laws to restrain those entrusted with their governance, just as economies need...

Different economies at different times use different institutional arrangements to constrain the people entrusted with allocating the economy's capital and other resources. Comparative financial histories show these corporate governance regimes to be largely stable through time, but capable of...

The fundamental unit of production in microeconomics is the firm, and this mirrors reality in the United States and United Kingdom. But elsewhere, business groups can be the more important unit, for business strategy is often formulated at the business group level, not the firm level. In many...

Equity ownership gives labor both a fractional stake in the firm's residual cash flows and a voice in corporate governance. Relative to other firms, labor-controlled publicly-traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly,...

Around the world, large corporations usually have controlling owners, who are usually very wealthy families. Outside the U.S. and the U.K., pyramidal control structures, cross shareholding and super voting rights are common. Using these devices, a family can control corporations without making a...