Trade and innovation cause structural change. Productive factors must flow from declining to growing industries. Banks play a major role in cutting credit to non-viable firms in downsizing sectors and in providing new credit to finance investment in expanding, innovative sectors. Structural...

This paper explores how banks specialize into different activities when they start with differing comparative advantages in some industry or geographic area or product. The possibility of coordination failure, i.e. wrong specialization is highlighted with risk neutral financial intermediaries....

Trade and innovation cause structural change. Productive factors must flow from declining to growing industries. Banks play a major role in cutting credit to non-viable firms in downsizing sectors and in providing new credit to finance investment in expanding, innovative sectors. Structural...