Financial frictions have been identified as key factors affecting economic fluctuations and growth. But, can institutional reforms reduce financial frictions? Based on a canonical investment model, we consider two potential channels: (i) financial transaction costs at the firm level; and (ii)...

"Major changes have occurred in the structure of former centrally planned economies, including a sharp rise in the share of services in GDP, employment, and international transactions. However, large differences exist across transition economies with respect to services intensity and services...

This paper summarizes the macroeconomic performance of the transition economies. We first review the initial conditions confronting these economies, the reform strategy that was proposed, and the associated controversies that arose a decade ago. We then account for the widely different outcomes,...

Countries in Sub-Saharan Africa (SSA) tend to lag those in most other regions in terms of governance and perceptions of corruption. Weak governance undermines economic performance through various channels, including deficiencies in government functions and distortions to economic incentives. It...

This paper constructs a composite index of corporate governance quality, documents its evolution from 1994 through 2003 in selected emerging and developed economies, and assesses its impact on aggregate and corporate growth and productivity. Our investigation yields three main findings. First,...

"The process of development is full of uncertainties, especially if it is a process of transition from a planned economy to a market oriented one. Because of uncertainties and country specificity, development must be a process of learning, selective adaptation, and industrial upgrading. This...

"Kenya has long had a reputation of being politically risky, manifested in corruption, uncertainty about policies, and the importance of political connections in doing business. Kenya began its economic liberalization in 1993. Reform picked up speed after a tightening of aid by donors on...

"The authors study how the effect of trade openness on economic growth depends on complementary reforms that help a country take advantage of international competition. This issue is illustrated with a simple Harris-Todaro model where output gains after trade liberalization depend on the degree...