Description
Abstract: Using data from a cross-sectional sample of 81 countries, this paper provides empirical evidence to support the hypothesis that the quality of governance is an important determinant of financial fragility (as measured by the volatility of investment over time). Not only do the results suggest that better governance reduces investment volatility, but interestingly the results also suggest that governance variables are better able to explain volatility in investment than some standard macroeconomic measure such as inflation.