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Working Paper
The forward exchange rate bias: a new explanation
Although the literature has devoted prodigious resources to investigating the risk premium explanation of the systematic time-varying discrepancies between forward and corresponding future spot exchange rates, empirical verification of the risk premium hypothesis has proven elusive. This paper tests an alternative explanation of the forward bias: the anticipated real exchange rate hypothesis. This hypothesis states that except for a constant risk premium, the predictable, time varying wedge between forward and expected future spot exchange rates is fully explained by the anticipated rate of ...
Working Paper
Stock markets, growth, and policy
In a model that emphasizes technological progress and human capital creator as essential features of economic development, this paper establishes a theoretical link between the financial system and per capita output growth. More specifically, it demonstrates that stock markets--by facilitating the ability to trade ownership of firms without disrupting the productive processes occurring within firms--naturally encourage technological innovation and economic growth. Along with recent studies of the role played by financial institutions other than stock markets in promoting growth, this paper ...
Working Paper
Social Capital and Mortgages
Using comprehensive mortgage-level data, we discover that the social capital of the community in which households live positively influences the likelihood of the approval of their mortgage applications, the terms of approved mortgages, and the subsequent performance of those mortgages. The results hold when conditioning on extensive household and community characteristics and a battery of fixed effects, including individual effects, data permitting, and when employing instrumental variables and propensity score matching to address identification and selection concerns. Concerning causal ...
Conference Paper
Introduction: Bank concentration and competition: an evolution in the making
The consolidation of banks around the world in recent years is intensifying public policy debates on the influences of concentration and competition on the performance of banks. In light of these developments, this paper first reviews the existing literature on the impact of bank concentration and competition. Second, the paper summarizes the main findings of the papers in this special issue of the JMCB within the context of this active literature. Finally, the paper suggests some directions for future research.
Working Paper
External debt and developing country growth
This paper examines the question of how the path of real GDP in four important Latin American countries, Argentina, Brazil, Chile and Mexico, might have differed if the sharp run-up in borrowing during the late 1970s and early 1980s had not occurred. Specifically, we ask whether these countries are better off or worse off for having borrowed heavily prior to the debt crisis, and we attempt to gauge the extent to which they would have received greater benefits if policies that improve economic efficiency had been followed. A simple macroeconomic mode is developed, and the simulation results ...
Journal Article
More on finance and growth: more finance, more growth?
Working Paper
A note on \"transfers\"
This paper attempts to provide some structure to the analysis and measurement of "net resource transfers." We go about achieving this objective in two steps. First, we use standard measures of portfolio changes and balance of payments statistics to evaluate the real resource transfers associated with financial transactions. Second, we sketch ways in which this analytical framework can be used to address the economic concerns associated with the term "net resource transfers," e.g., questions regarding the "burdens" of international debt obligations and the effects of these obligations on ...
Working Paper
Financial structure and economic development
An important challenge to economists is to explain how financial contracts and institutions affect economic growth while simultaneously explaining how economic development elicits the creation and modification of an economy's financial structure. This paper addresses one side of this inherently two-sided issue. The paper shows how risk, transactions costs, and economies of scale in information gathering and resource coordination create incentives for the emergence of commonly observed financial institutions and contracts and how the resulting financial structure influences the steady state ...
Conference Paper
How much bang for the buck? Mexico and dollarization
Working Paper
Inflation and financial market performance
An exploration of the cross-sectional relationship between inflation and an array of indicators of financial market conditions, using time-averaged data covering several decades and a large number of countries.