This paper develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services in affecting the productivity of private capital, specialization, and growth. The model provides potential explanations for the...

Despite far-reaching banking sector reforms and a prolonged period of macroeconomic stability and strong economic growth, financial intermediation in Armenia has lagged behind other transition countries, and interest rate spreads have remained higher than in most Central and Eastern European...

This paper examines monetary policy transmission in Armenia in light of the authorities' intention to shift to an inflation-targeting regime over the medium term. We find that the capability of monetary policy to influence economic activity and inflation is still limited, as important channels...

In many developing countries, a significant part of economic activity takes place in the informal sector. Earlier work has examined the determinants of the size of the informal sector, focusing separately on factors such as tax and regulation burden, financial market development, and the quality...

This paper presents, for the first time, multi-dimensional indices of the quality of budget institutions in low-income countries. The indices allow for benchmarking against the performance of middle-income countries, across regions, and according to different institutional arrangements that...

This paper analyzes the pervasiveness and persistence of rent seeking, misgovernance, and public sector inefficiency in many developing and transition economies. We formalize evidence from country experiences and empirical studies into a stylized analytical framework that reflects realistic...

This paper develops a dynamic computable general equilibrium model in which optimizing agents evade taxes by operating in the underground economy. The cost to firms of evading taxes is that they find themselves subject to credit rationing from banks. Our model simulations show that in the...

In this paper we examine economic disparities across regions in Russia and offer a theoretical treatment of various transfer rules between different regions. We analyze the principle of partial equalization, which implies that the more depressed regions should be subsidized by the more...

The paper relies on a firm-level data on transition economies to examine the relationship between informality and bank credit. We find evidence that informality is robustly and significantly associated with lower access to and use of bank credit. We also find that higher tax compliance costs...

This paper examines key aspects of the ongoing decentralization process in transition economies and identifies areas where the present systems can have potentially adverse impacts on both service delivery and macroeconomic performance. We discuss three critical principles of a sound and...