The role of the financial sector in society is a double-edged sword. On one hand, it can channel resources to productive uses that boost economic development, create jobs, alleviate poverty, and reduce inequality. On the other hand, it is subject to booms and busts in credit, and these can lead to a misallocation of resources, a drop in living standards, and economic stagnation.

Despite several decades of empirical research on these topics, surprisingly little is known about when and why financial sector activity is associated with good and economic outcomes and when it is not. I propose to make progress on these questions by developing new datasets for research in finance and macroeconomics that measure outstanding credit, value added, output, and input-output linkages for many sectors in the economy and a broad sample of around 120 countries.

These data will help me answer key questions about macro-financial linkages and their policy implications, such as:
1. Which sectors account for major booms and busts in credit? Which activities are associated with debt-fueled booms that foreshadow economic crashes and financial crises?
2. What is the role of financial liberalisation in the surprising decline of manufacturing sectors around the globe, sometimes called “premature deindustrialisation”?
3. Can industrial policy and credit policy successfully target key sectors in the economy, and are such sectoral subsidies successful in engineering economic growth?
4. Do lending subsidies and government-directed credit affect firms’ employment and growth outcomes? Do they subsidise more or less productive firms?