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...

This paper presents a framework for quantitatively evaluating the macroeconomic effects of corporate restructuring and applies it to Japan. Using firm-level financial statement data, it estimates total factor productivity (TFP) of individual Japanese firms. Given the estimated distribution of...

Different levels of corporate leverage are used in this paper to help explain the wide range of post-crisis output adjustment across East Asia. In the model developed here, highly leveraged firms facing a cutoff of capital inflows are threatened by bankruptcy. These firms respond by eliminating...

The paper suggests that when firms differ stochastically in their productivity, a bank may find it optimal not to bail out the failed nonconglomerate firms at all, but to bail out conglomerates fully. Expectation of such bailout policy may encourage risk-averse firms to join a conglomerate to...

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...

This paper proposes that international rescue financing should not be provided to a country where a crisis first occurs, but rather to any country that suffers a subsequent crisis. Such a timing-based lending facility can be Pareto-superior to both laissez-faire and existing international crisis...

FocusOur paper provides a fresh take on the way the US dollar exchange rate influences the volume of global trade. We take as our starting point the substantial financing needs of the long supply chains, or global value chains (GVCs), that underpin trade in manufactured goods. These financial...

Intro -- Contents -- I. INTRODUCTION -- II. PROPOSAL FOR A NEW CRISIS-PREVENTION FACILITY -- III. THE BASIC MODEL -- IV. LAISSEZ-FAIRE -- V. EXISTING CRISIS-LENDING FACILITIES -- VI. TIMING-BASED CRISIS-LENDING FACILITY -- VII. EXTENSIONS AND DISCUSSIONS -- VIII. CONCLUSION -- APPENDIX I --...

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 presents a general equilibrium model of interenterprise arrears, characterized by n-stage production technology with random productivity shocks. The model shows that large interenterprise arrears in transition economies may reflect substantial business risks in those countries and...