A burgeoning literature finds that financial development exerts a first-order impact on long-run economic growth, which raises critical questions, such as why do some countries have well-developed growth-enhancing financial systems while others do not? The law and finance theory focuses on the...

The authors assess three established theories about the historical determinants of financial development. They also propose an augmented version of one of these theories. The law and finance view, stresses that different legal traditions emphasize, to differing degrees, the rights of individual...

In the globalizing economy, national policymakers are often forced to accept the challenge of financial integration. Faced with the potentially destabilizing effects of international financial markets, they have to strengthen financial regulation, importing international best practices and...

It is naive to believe that a market economy can be introduced by"shock therapy,"the author argues. In the several cases when it has been attempted, it has brought problems. A market economy requires adequate institutions and appropriate behavior, both of which can be introduced only gradually...

The authors analyze the role of institutions in resolving systemic banking crises for a broad sample of countries. Banking crises are fiscally costly, especially when policies like substantial liquidity support, explicit government guarantees on financial institutions’ liabilities, and...

One explanation for Africa's failure to develop is the weakness of its public institutions. The authors consider one aspect of that weakness: rent-seeking and corruption at the top of government. Under the conditions of their model, and autocrat who seeks to maximize personal financial return...

The authors examine the impact of bank supervision on the financing obstacles faced by almost 5,000 corporations across 49 countries. They find that firms in countries with strong official supervisory agencies that directly monitor banks tend to face greater financing obstacles. Moreover,...

The authors investigate whether firms'access to external financing, to fund growth differs between market-based, and bank-based financial systems. Using firm-level data for forty countries, they compute the proportion of firms in each country that relies on external finance, and examine how that...

With the collapse of communism in Eastern Europe and the Soviet Union in 1989-91, many economic reformers supported"Big Bang"privatization-the rapid transfer of state-owned enterprises to private individuals. It was hoped that Big Bang privatization would create the conditions for a demand-led...

Because protection of property rights cannot be appropriated by any individual, it is widely recognized as being the state's responsibility. Moreover, recent empirical evidence suggests that protection of property rights leads to higher investment levels and faster growth. The extent of property...