Multilateral Development Banks: Counter-cyclical Mandate and Financial Constraints

State Banks , Institutions , and Financial Development ∗

We present a locational model of banking with two types of private banks, honest and opportunistic, and a state bank that is assumed to be less efficient. Opportunistic banks choose whether to honor their contracts with depositors depending on the probability of contract enforcement. We derive three types of equilibria, which depend on institutional quality: a “low” equilibrium in which private...

Financial Development and Financing Constraints : International

Financial Sanctions and Iranian Banks’ Performance

In this study, we use Stochastic Frontier analysis approach to estimate cost efficiency, economies of scale, and technological progress among Iranian banks from 1999 to 2012. The results show that there is a marked difference in cost efficiency before and after the recent financial sanctions against Iranian banking industry. Moreover, the results indicate that specialized government-owned banks...

Cooperative Banks and Financial Stability

Cooperative banks are an important, and growing, part of many financial systems. The paper analyzes empirically the role of cooperative banks in financial stability. Contrary to some suggestions in the literature, we find that cooperative banks are more stable than commercial banks. This finding is due to much lower volatility of the cooperative banks’ returns, which more than offsets their low...

Bubbles, Banks, and Financial Stability

We construct a model of rational bubbles under credit frictions and show that bubbles held by banks can generate large credit expansions followed by financial crisis. The size of boom-bust is somewhat larger than the case in which savers directly hold bubbles. Thus massive credit exansion during booms can be interpreted as an early warning indicator of possible subsequent crisis.