Financial innovation is inextricably tied to asymmetric information and therefore sets the stage for financial crises. Over history, every truly meaningful crisis has had elements of asymmetric information, particularly affecting innovative financial instruments that are primary market...

This paper develops a micro-founded general equilibrium model of the financial system composed of ultimate borrowers, ultimate lenders and financial intermediaries. The model is used to investigate the impact of uncertainty about the likelihood of governmental bailouts on leverage, interest...

What can history can tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the...

I model a financial market that dries out in the wake of premature liquidations. Two main results are obtained. First, liquidity may vanish even if small, riskneutral buyers could easily compensate the ongoing selling. Thus, more markets are vulnerable to quot;runsquot; than suggested by...

This paper investigates the influence of corporate governance on financial firms' performance during the 2007-2008 financial crisis. Using a unique dataset of 296 financial firms from 30 countries that were at the center of the crisis, we find that firms with more independent boards and higher...

Usurers have been the first step to financial intermediation. Standing as financial intermediaries, they were carrying out the high risk not to be refunded the money granted as loans. But this high risk has always been remunerated by a high interest rate on loans granted. Banks institutions, as...

This paper elucidates the key debates surrounding the optimal design of financial systems and institutions: bank-based versus market-based; universal versus specialized banking; relationship versus arms-length banking. The paper also examines the historical pattern of financial system development...

This paper assesses the potential impact of FinTech on the finance industry. I document first that financial services remain surprisingly expensive, which explains the emergence of new entrants. I then argue that the current regulatory approach is subject to significant political economy and...

The bargaining power of international banks is currently still very high as compared to what it was at the time of the Bretton Woods conference. As a consequence, systemic financial crises are likely to remain recurrent phenomena with large effects on macroeconomic aggregates. Mainstream...

For now, effective capital controls allow the Chinese authorities to retain regulated deposit and lending rates, quantitative credit guidance and bond market rationing. Relaxation of the capital controls would put these policies at risk. Reserve requirements can be extended to bank inflows from...