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Working Paper
Inflation and financial market performance
An exploration of the cross-sectional relationship between inflation and an array of indicators of financial market conditions, using time-averaged data covering several decades and a large number of countries.
Working Paper
Bank deregulation and racial inequality in America
We use the cross-state, cross-time variation in bank deregulation across the U.S. states to assess how improvements in banking systems affected the labor market opportunities of black workers. Bank deregulation from the 1970s through the 1990s improved bank efficiency, lowered entry barriers facing nonfinancial firms, and intensified competition for labor throughout the economy. Consistent with Becker?s (1957) seminal theory of racial discrimination, we find that deregulation-induced improvements in the banking system boosted blacks?relative wages by facilitating the entry of new firms and ...
Working Paper
Stock markets, growth, and policy
In a model that emphasizes technological progress and human capital creator as essential features of economic development, this paper establishes a theoretical link between the financial system and per capita output growth. More specifically, it demonstrates that stock markets--by facilitating the ability to trade ownership of firms without disrupting the productive processes occurring within firms--naturally encourage technological innovation and economic growth. Along with recent studies of the role played by financial institutions other than stock markets in promoting growth, this paper ...
Conference Paper
Regulations, market structure, institutions, and the cost of financial intermediation
This paper examines the impact of bank regulations, market structure, and national institutions on bank net interest margins and overhead costs using data on over 1400 banks across 72 countries while controlling for bank specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost the cost of financial intermediation. Inflation also exerts a robust, positive impact on bank margins and overhead costs. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments ...
Working Paper
The capital flight \"problem.\"
This paper isolates the common themes and policy recommendations found in the capital flight literature, and evaluates their statistical, conceptual, and empirical foundations. We find that there is no basis for presuming a stable link between any measure of capital flight and a nation's growth potential or ability to meet external obligations. Thus, although popular measures of capital flight are occasionally indicative of underlying economic and political problems, "capital flight" is not generally useful as a policy target or reliable as a signal of when to intensify or mitigate efforts ...
Working Paper
External debt and developing country growth
This paper examines the question of how the path of real GDP in four important Latin American countries, Argentina, Brazil, Chile and Mexico, might have differed if the sharp run-up in borrowing during the late 1970s and early 1980s had not occurred. Specifically, we ask whether these countries are better off or worse off for having borrowed heavily prior to the debt crisis, and we attempt to gauge the extent to which they would have received greater benefits if policies that improve economic efficiency had been followed. A simple macroeconomic mode is developed, and the simulation results ...
Conference Paper
Introduction: Bank concentration and competition: an evolution in the making
The consolidation of banks around the world in recent years is intensifying public policy debates on the influences of concentration and competition on the performance of banks. In light of these developments, this paper first reviews the existing literature on the impact of bank concentration and competition. Second, the paper summarizes the main findings of the papers in this special issue of the JMCB within the context of this active literature. Finally, the paper suggests some directions for future research.
Working Paper
An international arbitrage pricing model with PPP deviations
This paper develops an intertemporal, international asset pricing model for use in applied theoretical and empirical research. An important feature of the model is that it incorporates both stochastic inflation rates and stochastic Purchasing Power Parity deviations (PPP). The model derives the equilibrium real return on assets, and obtains empirically tractable reduced form equations which can be used to examine such issues as capital market segmentation, currency substitution, exchange rate volatility, and the forward exchange market's risk premium. Mechanically, the model begins as a ...
Working Paper
Financial structure and economic development
An important challenge to economists is to explain how financial contracts and institutions affect economic growth while simultaneously explaining how economic development elicits the creation and modification of an economy's financial structure. This paper addresses one side of this inherently two-sided issue. The paper shows how risk, transactions costs, and economies of scale in information gathering and resource coordination create incentives for the emergence of commonly observed financial institutions and contracts and how the resulting financial structure influences the steady state ...
Working Paper
Social Capital and Mortgages
Using comprehensive mortgage-level data, we discover that the social capital of the community in which households live positively influences the likelihood of the approval of their mortgage applications, the terms of approved mortgages, and the subsequent performance of those mortgages. The results hold when conditioning on extensive household and community characteristics and a battery of fixed effects, including individual effects, data permitting, and when employing instrumental variables and propensity score matching to address identification and selection concerns. Concerning causal ...