International Economics

Untitled Document

	DOES FINANCIAL LIBERALIZATION IMPROVE THE ALLOCATION OF INVESTMENT?
	URL: http://www.bu.edu/econ/ied/neudc/papers/Schiantarelli-final.doc
	Has financial liberalization improved the efficiency with which investment funds are allocated to competing uses? In this paper, we address this question, using firm level panel data from twelve developing countries. The basic idea is to investigate whether financial liberalization has increased the share of investment going to firms with a higher marginal return to capital. To this end we develop a summary index of the efficiency of allocation of investment. We then examine the relationship between this index and various measures of financial liberalization. The results suggest that in the majority of cases financial reform has lead to an increase in the efficiency with which investment funds are allocated.
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Untitled Document

	The Global Financial Crisis and Economic Reform in the Middle East
	URL: http://www.mepc.org/journal/9902_richards.html
	What is the likely impact of the current international financial crisis on the trajectory of reform of governments in the Middle East and North Africa? A process of economic reform has been underway for nearly a decade throughout the region. The "Washington Consensus" package of reforms, leading to greater reliance on the private sector, has been widely viewed in U.S. policy and academic circles as the key to successfully stimulating the very large volume of capital investment that is needed to cope with the region's serious socioeconomic problems. However, the Washington Consensus view has been that reforms were moving sluggishly and that, in particular, the absence of open capital markets helped to keep the region mired in economic stagnation. By contrast, regional leaders and analysts often countered that political stability necessitated gradualism, and that opening capital markets was a tricky business because of the potentially large down-side risks involved. Government actors were loath to make any precipitous changes, not only out of fear of provoking social disorder, but also from disquiet over losing potential levers of power, such as state-owned enterprises. They argued that they understood the need to change but that the changes should be done slowly. The crash of 1997 in Asia and the subsequent seizing up of emerging-market lending are likely to confirm Middle Eastern governments' view that they are wise to move gradually.
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