During the past twenty-five years, development economists have made a major shift toward a more mainstream, market-oriented approach to the financial sector. Economists now take for granted that a well-developed financial sector contributes to economic growth. But until recently there was...

Since 1989, U.S. commercial banks have shifted their portfolios away from commercial loans toward government securities. Using data for individual banks, the authors document this shift and test for whether it can be attributed to the imposition of risk-based capital requirements. Their results...