During the last two decades, the degree of openness of national financial systems has increased substantially. At the same time, asymmetries in information and other financial market frictions have remain prevalent. We study both empirically and theoretically the implications of the opening up...

This paper examines the consequences of international financial integration in a two-sector heterogeneous-agent dynamic general equilibrium model of occupational choice with financial constraints and idiosyncratic risks. We discuss the macroeconomic and distributional effects of financial market...

Contrary to the prediction of benchmark neoclassical models, growth accelerations in developing countries tend to be associated with current account improvements, resulting from larger increases in saving than in investment. I argue that this can be driven by the behavior of entrepreneurs facing...

This paper shows that the behavior of entrepreneurs facing incomplete financial markets and risky investment can explain why growth accelerations in developing countries tend to be associated with current account improvements. The uninsurable risk of losing invested capital forces entrepreneurs...

This paper shows that the behavior of entrepreneurs facing incomplete financial markets and risky investment can explain why growth accelerations in developing countries tend to be associated with current account improvements. The uninsurable risk of losing invested capital forces entrepreneurs...

In a production economy with trade in financial markets motivated by the desire to share labor-income risk and to speculate, we show that speculation increases volatility of asset returns and investment growth, increases the equity risk premium, and reduces welfare. Regulatory measures, such as...