Intro -- Contents -- I. INTRODUCTION -- II. THE BASIC MODEL -- III. SIMULTANEOUS VERSUS SEQUENTIAL LIQUIDITY SHORTAGES -- IV. EARLY VERSUS LATE BAILOUTS -- V. POLITICAL ECONOMY -- VI. EXTENSIONS -- VII. CONCLUSIONS -- References.

This paper addresses the growth, welfare, and distributional effects of credit markets. We construct a general equilibrium model where human capital is the engine of growth and individuals differ in their education abilities. We argue that the existence of credit markets encourages...

In a rational-expectations framework, we model depositors'' confidence as a function of the probability of future bank bailouts. We analyze the effect of alternative bank bailout policies on depositors'' confidence in an emerging market setting, where liquidity shortages of banks are revealed...