Claessens and Laeven analyze how property rights affectThe authors find that improved asset allocation due to the allocation of firms' available resources among better property rights has an effect on growth in sectoral different types of assets. In particular, they investigate value added equal to improved access to financing arising empirically for a large number of countries whether firms from greater financial development. The results are in environments with more secure property rights robust, using various samples and specifications, allocate available resources more toward intangible assets including controlling for growth opportunities. and consequentially grow faster. This paper-a product of the Policy Division, Financial Sector Strategy and Policy Department-is part of a larger effort in the department to study the link between finance and growth. Copies of the paper are available free from the World Bank,

Much of the current debate on reforming the international financial architecture is aimed at reducing the risks of contagion-best defined as a significant increase in cross-market linkages after a shock to an individual country (or group of countries). This definition highlights the importance of other links through which shocks are normally transmitted including trade and finance. During times of crisis, the ways in which shocks are transmitted do seem to differ, and these differences appear to be important. Empirical work has helped to identify the types of links and other macroeconomic conditions that can make a country vulnerable to contagion during crisis periods, although less is known about the importance ofmicroeconomic considerations and institutional factors in propagating shocks. Empirical research has helped to identify those countries that are at risk of contagion as well as some, albeit quite general, policy interventions that can reduce risks.

No abstract

No abstract