During the last years the relationship between financial development and economic growth has received widespread attention in the literature on growth and development. This paper summarises in its first part the results of this research, stressing the growth-enhancing effects of an increased...

Even though the sector of Non-bank financial intermediaries (NBFI) or shadow banks represent a large part of the contemporary financial system, these institutions received almost no attention in macroeconomic studies so far. Their presence has significant influence on the conduct of monetary...

Financial intermediaries may increase economic efficiency through intertemporal risk smoothing. However without an adequate regulation, intermediation may fail to do this. This paper studies the effects of a production shock in a closed economy and compares abilities of market-based and...

We study the impact of ambiguity on two alternative institutions of financial intermediation in an economy where consumers face uncertain liquidity needs. The ambiguity the consumers experience is modeled by the degree of confidence in their additive beliefs. We analyze the optimal liquidity...

This essay reflects upon the relationship between the current theory of financial intermediation and real-world practice. Our critical analysis of this theory leads to several building blocks of a new theory of financial intermediation. Current financial intermediation theory builds on the...

We examine banking competition when deposit or loan contracts contingent on macroeconomic shocks become feasible. We show that the risk allocation is efficient, provided that banks are not bailed out. In this case, banks may shift part of the risk to depositors. The private sector insures the...

We study the consequences and optimal design of bank deposit insurance in a general equilibrium model. The model involves two production sectors. One sector is financed by issuing bonds to risk-averse households. Firms in the other sector are monitored and financed by banks. Households fund...

We analyse a model of financial intermediation in which intermediaries are subject to moral hazard and they do not invest socially optimally, because they ignore the systemic costs of failure and, in the case of banks, because they fail to account for risks which are assumed by the deposit...

Systemic risk arises when shocks lead to states where a disruption in financial intermediation adversely affects the economy and feeds back into further disrupting financial intermediation. We present a macroeconomic model with a financial intermediary sector subject to an equity capital...

We provide a general characterization of the structure of rational expectations equilibria of any degree of revelation for pure exchange, sequential economies, with deffinitely many states of private information, an incomplete financial market and nominal assets. We estimate the dimension of the...