Existing literature highlights opportunistic behavior as the main reason why rational agents underinvest in relationship-specific assets (the hold-up problem). However, a supplier would also be reluctant to undertake relationship-specific investment if she cannot observe financial stability or...

We examine the non-linearity between financial development and economic growth in China. Specifically, we use a threshold model to investigate whether provinces with high level of personal income can exploit financial development efficiently. Empirical analysis, using cross-provincial data from...

The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth,...

Up to a point, banks and markets both foster economic growth. Beyond that limit, expanded bank lending or market-based financing no longer adds to real growth. But when it comes to moderating business cycle fluctuations, banks and markets differ considerably in their effects. In normal...

In 2009, the world economy crossed the strongest postwar economic crisis, affecting all the economic and social areas. The process of recovery after the global recession started at the end of 2009, but the level of investment and production will be slow in 2010. In 2009, the international trade...

This paper analyzes the role of financial intermediation in a simple endogenous growth model. The results suggest that multiple endogenous growth paths can exist in connection with various levels of financial development, due to the reciprocal externality between financial and real sectors....

Increasing domestic and external imbalances pose a serious challenge to economic development in China. While several forms of economic imbalances have been identified and discussed, many of these imbalances represent symptoms rather than the main issues that Chinese policymakers have to deal...

Existing literature highlights opportunistic behavior as the main reason why rational agents underinvest in relationship-specific assets (the hold-up problem). However, a supplier would also be reluctant to undertake relationship-specific investment if she cannot observe financial stability or...

This paper analyzes the relationship between financial repression and structural change. We present a simple theoretical model of structural transformation in which the impact of financial repression on unbalanced growth is studied. The model suggests that governments may choose to repress the...

In this paper we have built a model of financial intermediation that explains the GDP variability pattern of an economy during the development process. In our model, per capita is more volatile in the middle-income economies than in both low and high-income economies. We show that, if the model...