Law and Macro Finance

Abstract This article makes the case for developing law and macro-finance as an integrated research field that explores the role of credit and its regulation within the economic cycle. It highlights the importance of macro-financial conditions, such as leverage and liquidity, over traditional concerns like agency costs and efficiency when assessing the economic impact of the law. The article argues that the future of law and macro-finance research should focus on demonstrating (1) how the law operates under different macro-financial conditions, (2) how the law can shape these conditions, and (3) how these conditions influence legal frameworks. This research is partly inspired by, and could also be valuable for, organizations like the World Bank and IMF, which increasingly acknowledge the role of debt in financial crises and are beginning to promote policies that help countries better align the size of their credit markets with their economic needs.