Traditional growth theory does not include financing and suggests that growth will be continuous. In fact, however, growth is often discontinuous. In some periods, there are booms with rapid growth that end in financial crises with low growth for sustained periods. This paper argues that the...

Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising interest rates aggressively enough. This result is different...

Debate has intensified in recent years on the advantages and disadvantages of moving towards a full mark-to-market accounting system for banks and insurance companies. The debate has been heated by moves by the International Accounting Standards Board (IASB) and the US Financial Accounting...

We develop a simple model of the interbank market where banks trade a long term, safe asset. When there is a lack of opportunities for banks to hedge idiosyncratic and aggregate liquidity shocks, the interbank market is characterized by excessive price volatility. In such a situation, a central...

"<p> Franklin Allen, James McAndrews and Philip Strahan, October 2001<p> <p>Abstract: E-finance is defined as "The provision of financial services and markets using electronic communication and computation". In this paper we outline research issues related to e-finance that we believe set the stage for...</p></p></p>

In a 1992 article, Porter argues that the U.S. capital investment system is failing a wide range of constituencies including firms' investors, managers, and employees, because of its focus on short term performance. In contrast, in Germany and Japan many shareholders have large stakes which are...

A financial system is fragile if a small shock has a large effect. Sunspot equilibria, where the endogenous variables depend on extrinsic uncertainty, provide an extreme illustration. However, fundamental equilibria, where outcomes depend only on intrinsic uncertainty, can also be fragile. We...

What is a Financial System?<p> <p>The purpose of a financial system is to channel funds from agents with surpluses to agents with deficits. In the traditional literature there have been two approaches to analyzing this process. The first is to consider how agents interact through financial markets....</p></p>