This paper explores how different types of financial regulation could combat many of the phenomena that were observed in the financial crisis of 2007 to 2009. The primary contribution is the introduction of a model that includes both a banking system and a "shadow banking system" that each help...

This paper examines the relationship between the structure of banking markets and economic growth using a new dataset on manufacturing industry-level growth rates and banking market concentration for U.S. states during 1899-1929--a period when the manufacturing sector was expanding rapidly and...

For over a century, economists and policy makers have debated the relative merits of bank-based versus market-based financial systems. Recent research, however, argues that classifying countries as bank-based or market is not a very fruitful way to distinguish financial systems. This paper...

Motivated by growing concerns about the risks and instability of China's financial system, this article reviews several commonly perceived financial risks and discusses their roots in China's politico-economic institutions. We emphasize the need to evaluate these risks within China's unique...

In this article, we examine the effect of the imperfect mobility of goods on international risk sharing and, through that, on the investment in risky projects, welfare and growth. We find that the welfare gain of financial market openness is not monotonic with respect to investors' risk aversion...

How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as intermediation spreads and the firm-size distribution for...

Why doesn't capital flow into fast-growing countries? In this paper, we provide a quantitative framework incorporating heterogeneous producers and underdeveloped domestic financial markets to study the joint dynamics of total factor productivity (TFP) and capital flows. When an unexpected...

Financial openness is often associated with higher rates of economic growth. We show that the impact of openness on factor productivity growth is more important than the effect on capital growth. This explains why the growth effects of liberalization appear to be largely permanent, not...

Economic theory has identified a number of channels through which openness to international financial flows could raise productivity growth. However, while there is a vast empirical literature analyzing the impact of financial openness on output growth, far less attention has been paid to its...

Cross-country regressions suggest little connection from foreign capital inflows to more rapid economic growth for developing countries and emerging markets. This suggests that the lack of domestic savings is not the primary constraint on growth in these economies, as implicitly assumed in the...