China's securities markets are unlike those of Amsterdam, London or New York. Those markets evolved over centuries from myriad interactions among those seeking finance on the one hand and savers seeking rewarding investments on the other. Such spontaneous securities markets did emerge throughout...

We investigate the characteristics and the default behavior of households who take out complex mortgages. Unlike traditional fixed rate or adjustable rate mortgages, complex mortgages are not fully amortizing and enable households to postpone loan repayment. We find that complex mortgages are...

Credit market imperfections provide the key to understanding many important issues in business cycles, growth and development, and international economics. Recent progress in these areas, however, has left in its wake a bewildering array of individual models with seemingly conflicting results....

The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification...

Discussions of financial risk often fail to distinguish between risks that are consciously borne and those that are not. To understand the breeding conditions for financial crises the prime focus of concern should not be simply on large risk-taking per se, but on the unintended, or unanticipated...

This paper provides a simple model showing that the extent of competition in credit markets is important in determining the value of lending relationships. Creditors are more likely to finance credit constrained firms when credit markets are concentrated because it is easier for these creditors...

Do sophisticated international financial markets obviate the need for an active union-wide authority to orchestrate fiscal transfers between countries to provide adequate insurance against country-specific economic fluctuations? We argue that they do. Specifically, we show that in a benchmark...

To identify the effect of social capital on financial development, we exploit the well-known differences in social capital and trust (Banfield (1958), Putnam (1993)) across different parts of Italy, using microeconomic data on households and firms. In areas of the country with high levels of...

This paper reviews the evolving literature that links financial development, financial crises, and economic growth in the past 20 years. The initial disconnect—with one literature focusing on the effect of financial deepening on long-run growth and another studying its impact on volatility and...

We introduce imperfect creditor protection in a multi-country version of Schumpeterian growth theory with technology transfer. The theory predicts that the growth rate of any country with more than some critical level of financial development will converge to the growth rate of the world...