What can history tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the...

The large inflow of investment capital to commodity futures markets in the last decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows either did or did not cause a price...

The heavy-tailed distribution of firm sizes first discovered by Zipf (1949) is one of the best established empirical facts in economics. We show that it has strong implications for asset pricing. Due to the concentration of the market portfolio when the distribution of the capitalization of...

We study a market for funding real investment in which valuation creates information on which adverse selection can occur. Unlike in previous models, higher amounts of valuation are associated with lower market prices and so greater returns to valuation, and this strategic complementarity in the...

Energy efficiency and conservation are considered key means for reducing greenhouse gas emissions and achieving other energy policy goals, but associated market behavior and policy responses have engendered debates in the economic literature. We review economic concepts underlying consumer...

A growing body of rigorous research shows that financial services innovations can have important positive impacts on wellbeing, but also that many do not. We first describe the latest evidence on what works in financial inclusion. Second, we summarize research on key financial market failures...

We argue that existence of public good does not necessarily imply market failure, and illustrate this point in the context of international trade. An influential hypothesis states that export pioneers are too few relative to social optimum because the first exporter's action creates an...

Economists argue that rich information environments and formal enforcement of contracts are necessary to prevent market failures when information asymmetries exist. We test for the necessity of formal enforcement to overcome the problems of asymmetric information by estimating the value of...

This paper studies a mechanism design model of financial intermediation. There are two informational frictions: agents receive unobservable shocks and can participate in markets by engaging in trades unobservable to intermediaries. Without regulations, intermediaries provide no risk sharing...

Employment and hours appear far more cyclical than dictated by the behavior of productivity and consumption. This puzzle has been called “the labor wedge” — a cyclical intratemporal wedge between the marginal product of labor and the marginal rate of substitution of consumption for...