This paper deals with the role of trade regimes in determining economic performance and growth in the developing countries. The policy and empirical literatures on trade orientation and economic growth are critically reviewed; it is argued that a key limitation of these works has been the inability to create measures of trade orientation that are: (i) objective; (ii) continuous and (iii) comparable across countries. A growth model that relates trade orientation to the ability to absorb technological progress from the rest of the world is developed for the case of a small country. The model is tested using a new index of trade orientation that is free from the limitations described above. The results obtained using a cross country data set provide strong support to the hypothesis that, with other things given, countries with a less distorted external sector grow faster than those countries with a more distorted external sector. The new theories of economic growth are also discussed, and their usefulness for analyzing the relation between trade orientation and growth in the developing countries is assessed.

The importance of seignorage relative to other sources of government revenue differs markedly across countries. The main theoretical implication of this paper is that countries with more unstable and polarized political systems rely more heavily on seignorage. This result is obtained within the context of a political model of tax reform. The model implies that the more unstable and polarized the political system, the more inefficient is the equilibrium tax structure (in the sense that tax collection is more costly to administer), and the higher therefore, the reliance on seignorage. This prediction of the model is tested on cross-section data for 79 countries. It is found that, after controlling for other variables, political instability significantly contributes to explain the fraction of government revenue derived from seignorage. This finding is very robust. We also find that seignorage is positively related to political polarization, even though here the evidence is weaker because of difficulties in measuring polarization.

This paper investigates to what extent the international financial community has taken into account the risk characteristics of borrowing less developed countries when granting loans. Specifically, this study analyzes the determinants of the spread between the interst rate charged to a particular country and the London Interbank Borrowing Rate (LIBOR). The empirical analysis uses data on 727 public and publicly guarantied Eurodollar loans granted to 19LDC's between 1976 and 1980. The results obtained show that lenders in Eurocredit markets have tended to take into account (some of) the risk characteristics of borrowers. In particular it was found that the level of the spread will be positively related to the debt/GNP ratio and the debt service ratio. On the other hand, the spread will be negatively related to the international reserves to GNP ratio and the propensity to invest. The results obtained also show that an increase in the foreign debt coupled with an equivalent increase in international reserves will tend to leave the perceived probability of default unaffected. The empirical analysis presented in this paper also indicates that as late as 1980 the international financial community had not perceived any significant increase in the probabilities of defaulting in the countries that eventually run into serious debt problems (i.e.

Comparative data for 93 countries are used to analyse the robustness of the relationship between openness and total factor productivity growth. Nine indexes of trade policy are used to investigate whether the evidence supports the view that total factor productivity growth is faster in more open economies. The results are robust to the use of openness indicator, estimation technique, time period and functional form, and suggest that more open countries experienced faster productivity growth. Although the use of instrumental variables help dealing with endogeneity, issues related to causality remain somewhat open, and require time series analyses to be adequately addressed.

The experiences of Chile under Allende and Peru under Garcia illustrate that when populist policies fail they do so at a frightening cost to the very groups they were meant to benefit. The Policy, Planning, and Research Complex distributes PPR Working Papen to dissaninate the findings of work in progress and to encourage the exchange of ideas among Bank staff and all others interested in 'evelopment issues. These papers carry the names of the authors, reflec only their views, and should be used and cited accordingly. The findings, interpretations, and conclusions are the authors' own. They should not be attributed to the World Bank, its Board of Directors, its managemrent, or any of its member countries.

VHEDVWLDQHGZDUGV#DQGHUVRQX.ODHGX * Instruments: human6 gdp65 qcap7 lly70 inv80 open80 dist lly75 bmp75l ** Instruments: human6 gdp65 qcap7 lly70 open80 dist lly75 bmp75l * The following instruments were used: (human65 gdp65l inv80 qcap58 qopen58 qopen73 qcap73 lly75 dist) ** Instruments: human6 gdp65 qcap7 lly70 open80 dist lly75 bmp75l)

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In this paper I analyze the anatomy of current account adjustments in the world economy during the last three decades. The main findings may be summarized as follows: (a) Major reversals in current account deficits have tended to be associated to "sudden stops" of capital inflows. (b) The probability of a country experiencing a reversal is captured by a small number of variables that include the (lagged) current account to GDP ratio, the external debt to GDP ratio, the level of international reserves, domestic credit creation, and debt services. (c) Current account reversals have had a negative effect on real growth that goes beyond their direct effect on investments. (d) There is persuasive evidence indicating that the negative effect of current account reversals on growth will depend on the country's degree of openness. More open countries will suffer less n in terms of lower growth n than countries with a lower degree of openness. (e) I was unable to find evidence supporting the hypothesis that countries with a higher degree of dollarization are more severely affected by current account reversals than countries with a lower degree of dollarization. And, (f) the empirical analysis suggests that countries with more flexible exchange rate regimes are able to accommodate the shocks stemming from a reversal better than countries with more rigid exchange rate regime.