In this paper we document three credit market imperfections prevalent in middle income countries that can help to explain boom-bust cycles, as well as other macroeconomic patterns observed at higher frequencies across these countries. These imperfections are: the existence of financing...

With inflation under control in many in middle income countries (MICs), it is now swings in credit, investment and asset prices that affect these countries the most. In this paper we present a framework to analyze both theoretically and empirically how credit market shocks are propagated and...

In this paper we characterize empirically the comovements of macro variables typically observed in middle income countries, as well as the boom-bust cycle that has been observed during the last two decades. We find that many countries that have liberalized their financial markets, have witnessed...

There is no agreement regarding the growth-enhancing effects of financial liberalization, mainly because it is associated with risky international bank flows, lending booms, and crises. In this paper we make the case for liberalization despite the occurrence of crises. We show that in developing...

We address the question of whether growth and welfare can be higher in crisis prone economies. First, we show that there is a robust empirical link between per-capita GDP growth and negative skewness of credit growth across countries with active financial markets. That is, countries that have...

In this paper, we document the fact that countries that have experienced occasional financial crises have, on average, grown faster than countries with stable financial conditions. We measure the incidence of crisis with the skewness of credit growth, and find that it has a robust negative...