Evidence suggests that banks tend to lend a lot during booms, and very little during recessions. We propose a simple explanation for this phenomenon. We show that, instead of dampening productivity shocks, the banking sector tends to exacerbate them, leading to excessive fluctuations of credit,...

This paper analyses the effects of disease and war on the accumulation of human and physical capital. We employ an overlapping-generations frame-work in which young adults, confronted with such hazards and motivated by old-age provision and altruism, make decisions about investments in schooling...