We present a model in which the importance of financial intermediation for development can be measured. We generate financial differences by varying the degree to which contracts can be enforced. Economies where enforcement is poor employ less capital and less efficient technologies. Yet,...

Total factor productivity (TFP) falls markedly during financial crises, as we document with recent evidence from Mexico and Asia. These falls are unusual in magnitude and present a difficult challenge for the standard small open economy neoclassical model. We show in the case of Mexico’s...

We test for hypercrowding out as a signal of market concerns over fiscal dominance in five Latin American countries. Hypercrowding out occurs when fiscally dominated governments’ domestic credit demands are perceived as so intrusive to a nation’s financial system that a move towards fiscal...

All agree partial dollarization or currency substitution is a legacy of past inflation and exchange rate instability. Some argue partial dollarization contributes to exchange rate instability. However, if Central Banks respond to dollarization by lowering money growth and maximizing seigniorage...

In most developing nations, formal workers tend to be more experienced, more educated, and earn more than informal workers. These facts are often interpreted as evidence that low-skill workers face barriers to entry into the formal sector. Yet, there exists little direct evidence that such...

Argentina’s GDP per working age person in 2003 was about the same as it was twenty years earlier and around fifteen percent below trend. By international standards that has been a dismal performance whose ultimate sources are important to uncover to eventually reverse that country’s...

We describe a dynamic model of financial intermediation in which fundamental characteristics of the economy imply a unique equilibrium path of bank and financial market lending. Yet we also show that economies whose fundamental characteristics have converged may continue to have very different...

Dynamic panel estimates show the negative relation between trade openness and inflation found by Romer (1993) but questioned by Terra (1998) became more robust in the 1990s, both among high income OECD and developing countries. Also during the 1990s, openness was associated with less variable...

We examine the economic depression that Argentina suffered in the 1980s, as well as the subsequent recovery, from the perspective of growth theory, taking total factor productivity as exogenous. The predictions of the neoclassical growth model conform rather well with the evidence for the "lost...

Poverty rates are now widely available, but are they reliable? Wide variations in estimated poverty rates for the same poverty line, year and country reflect an underlying reality: there is no widely accepted procedure for estimating national poverty rates. This paper proposes a simple, ex post...