Recent empirical work has shown that trust plays an important role in economic development. In this paper, we delve deeper into the mechanism behind that relationship. Specifically, we investigate the effect of trust on human and physical capital while controlling for the fact that the two types...

This paper extends the currency crisis models in Obstfeld [Obstfeld, M., 1994. The logic of currency crises. Cahiers Economiques et Monetaries], [Obstfeld, M., 1996. Models of currency crises with self-fulfilling features. European Economic Review 40, 1037-1047] by modeling both the government's...