It is commonly argued that poorly designed banking system safety nets are largely to blame for the frequency and severity of modern banking crises. For example, “underpriced” deposit insurance and/or low reserve requirements are often viewed as factors that encourage risk-taking by banks. In...

This paper provides a comprehensive theoretical and empirical analysis of “creditor rights” and “information sharing” throughout over 1.8 million private firms in Europe. We show that many of the outcomes associated with greater levels of creditor rights can be obtained with higher...

We introduce two new variations on the Nash demand game. One, like all known Nash-like demand games so far, has the Nash solution outcome as its equilibrium outcome. In the other, the range of solutions depends on an exogenous breakdown probability; surprisingly, the Kalai-Smorodinsky outcome...

The role of debt and equity changes over time and with the level of development. What are these changes, and why should they systematically occur across different countries and time periods? This article characterizes financial innovation as a dynamic process that both influences and is...

We formulate a simple theoretical model of a banking industry that we use to identify and construct theory-based measures of systemic bank shocks (SBS). These measures differ from “banking crisis” (BC) indicators employed in many empirical studies, which are constructed using primarily...

We start with an initial wealth distribution. Each agent may establish at most one link with any agent in each period, yielding a surplus that agents split according to a uniform division rule. Wealth evolves by adding the payoffs to current wealth. Many long-run wealth distributions can arise,...