This paper provides a unified theory to explain the onset of the financial crisis in 1998 and the striking economic recovery in Russia and the former Soviet Union afterwards. Before the crisis, the banking sector in these economies was stuck in a development trap in which the banking sector is...

The fundamental importance of economic institutions for economic growth through their impact on technological change has been argued, reconfirmed by recent empirical studies, but not examined theoretically. This paper tries to fill that gap. In the model proposed, economic growth is affected by...

We provide a model of contagion where countries borrow or lend for consumption smoothing at the market interest rate or a lower IMF rate. Highly indebted countries hit by large negative shocks to output will default. The resulting reduction in loanable funds raises interest rates, increases the...