Many Caribbean financial systems are relatively well developed for their size but benefits are concentrated in a small part of the population. In several large countries, the financial development levels are below what is warranted by that country's own macroeconomic fundamentals. SMEs, in...

We analyze how bank profitability impacts financial stability from both theoretical and empirical perspectives. We first develop a theoretical model of the relationship between bank profitability and financial stability by exploring the role of non-interest income and retail-oriented business...

Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit,...

This paper explores the nexus between the financial cycle and business cycle in Brazil. Cycles are estimated using a variety of commonly-used statistical methods and with a small, semistructural model of the Brazilian economy. An advantage of using the model-based approach is that financial and...

There is a vast body of literature estimating the impact of financial development on economic growth, inequality, and economic stability. A typical empirical study approximates financial development with either one of two measures of financial depth - the ratio of private credit to GDP or stock...

Capital markets can improve risk sharing and the efficiency with which capital is allocated to the real economy, boosting economic growth and welfare. However, despite these potential benefits, not all countries have well developed capital markets. Moreover, government-led initiatives to develop...

This paper examines the state of financial development in the Latin America and Caribbean (LAC) region as well as potential growth and stability implications from further development. The analysis suggests that access to financial institutions has expanded notably in the past decade, and the...

This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We use different empirical approaches to show that there can indeed be "too much" finance. In particular, our results suggest that finance starts having a...

Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. We study the impact of financial dollarization,...

This paper assesses liquidity risk for the United States (U.S.) bond mutual funds industry and performs a range of analyses to identify which fund categories are more vulnerable to distress than others, and how sales from funds can impact financial stability. We develop a new measure to identify...