This paper presents a simple model capturing differences between debt and equity finance to examine how financial structure matters for macroeconomic volatility. Debt finance is relatively cheap in the sense that debt holders need to verify relatively few profitability states, but debt finance...

This Paper uses empirical proxies for the domestic development and international integration of debt and equity markets to assess the role of financial development in international consumption smoothing. First, we find that both domestic and international finance contribute to international...