Recently a number of countries have experienced a prolonged slowdown in aggregate economic activity accompanied by a signi.cant deterioration of the banks.net worth. This paper studies the optimal bank behavior when they are severely undercapitalized but continue to operate due to lax government...

Shortly after the Revolution of 1789 France experienced a period of major hyper- inflation, which lasted until 1796, when the French government abolished the paper money and returned to the specie. In 1798 the French government ordered the local authorities in all departments to construct the...

We consider an economy, in which the elite controls the means of production. The private incentives of each elite member contradict the interests of the elite as a whole. While each member of the elite would benefit from engaging into new productive activities, the byproduct of such activities...

We build a dynamic political economy model with a two-class society, workers and the elite, in which the elite formation, the innovation rate and fiscal policy are endogenous. The model generates a mapping between institutions and patterns of growth consistent with empirical evidence. Ex ante,...