This paper reformulates the well known financial development conjecture (FDC) and supplies some new empirical evidence in its favour. The financial development conjecture, namely, that there exist strong feedback effects between real and financial development, is described in this paper by use...

Initially, voting rights were limited to wealthy elites providing political support for stock markets. The franchise expansion induces the median voter to provide political support for banking development as this new electorate has lower financial holdings and benefits less from the uncertainty...

We use portfolio theory to quantify the efficiency of state-level sectoral patterns of production in the United States. On the basis of observed growth in sectoral value added output, we calculate for each state the efficient frontier for investments in the real economy, the efficient Sharpe...

This Paper presents a new model of the East Asian crisis that combines three elements – multiple equilibria, investment collapse, and moral hazard – in a single simple account. We locate the causes of the crisis in poor financial regulation, highly-geared financial institutions, and implicit...

The aim of this paper is to construct theoretical models which help to shed light on the recent criticisms of volatile investment flows. We do not make any empirical attempt to establish the existence or gauge the importance of the adverse effects of volatile investment flows nor do we make any...

This paper presents a multiple-equilibrium model of the Asian financial crisis. The economy has Krugman-style over-investment caused by weak financial regulation and exacerbated by government guarantees. Following Dooley, the government only has a limited capacity or willingness to honour such...

We use portfolio theory to quantify the efficiency of state-level sectoral patterns of production in the United States. On the basis of observed growth in sectoral value-added output, we calculate for each state the efficient frontier for investments in the real economy. We study how rapidly...

In the context of an overlapping generations model, we show that liquidity constraints on households: (i) raise the saving rate; (ii) strengthen the effect of growth on saving; and (iii) increase the growth rate if productivity growth is endogenous. These propositions are supported by...

Throughout Central and Eastern Europe (CEE), there is a widespread failure of enterprise debtors to make scheduled payments of principal and interest to creditors, who in turn have strong incentives not to declare bankruptcy. In such circumstances, the price mechanism does not properly guide the...

This paper studies the relationship between investor protection, entrepreneurial risk taking and income inequality. In the presence of market frictions, better protection makes investors more willing to take on entrepreneurial risk when lending to firms, thereby improving the degree of risk...