"Countries around the world differ substantially in the relative importance of their banks and capital markets in providing investment financing. This paper examines one potential explanation for the cross-country differences in the importance of banks and capital market financing of investment....

"We study overborrowing and financial crises in an equilibrium model of business cycles and asset prices with collateral constraints. Private agents in a decentralized competitive equilibrium do not internalize the effects of their individual borrowing plans on the market price of assets at...