This paper explores the relation between the quality of financial institution and asset bubbles. In this paper, we will show that bubbles can improve the macro performance even if the quality of financial institution is very poor and the financial market does not work well. In this sense, the...

The paper examines the impacts of trade and capital movement between North and South, which differ in the quality of financial institution, on the productivity distribution and other characteristics of a financially-dependent industry. We find that financial imperfection causes firm...