ABSTRACT
Development economics has changed profoundly in the course of one generation. Twenty-five years ago the emphasis among development economists was on planning and allocation mechanisms, which separated the development community from the core of mainstream market-oriented economics. Academicians who followed development issues were often peripheral to the cutting edge in the economics literature. However, that has all changed in recent years and development issues are now at the forefront. As part of this transformation, the term development (which connotes a directed process) has been largely replaced by the term emerging markets. The very term emphasizes the private sector and the market-oriented paradigm of contemporary economics. In no other area is the change in thinking more striking than in analysis of the role of the financial sector - banks and capital markets - in the development process.
