The World Bank said in a statement on Friday that Stiglitz, who chaired President Bill Clinton's Council for Economic Advisers before moving to the bank, was returning to an academic post after almost three years as chief economist.

Wolfensohn, who has occasionally clashed with Stiglitz, said he had asked Stiglitz to continue to work for him as a special adviser and to head the committee looking for a new chief economist at the bank. "We will carry on with the work... to transform the development business as we know it," Wolfensohn said.

The job is a high-profile position that has in the past led to bigger and better things. Previous incumbents include US Treasury Secretary Lawrence Summers and Stanley Fischer, now number two at the IMF.

The World Bank, set up to helprevive a troubled world economic order from the turmoil of World War II, concentrates on development issues and easing poverty, while its sister organisation, the IMF, looks more closely at tax and monetary matters.

But the dividing lines between the two institutions blurred as capital started flowing more freely between rich and poor countries and the cash-rich bank helped fund the multi-billion dollar rescue deals in the financial crises of 1997-99.

Stiglitz, 56, earned a reputation for controversy during his tenure at the bank. He lobbied for capital controls at a time when the semi-official "Washington consensus" of the World Bank, IMF and the US administration was pressing countries to liberalise cash flows, and he was sharply critical of the IMF's initial rescue packages for countries caught up in the Asia financial crisis.

Stiglitz, an author of economics textbooks, also lashed out at Washington's recommendations for Russia, which remains mired in economic chaos despite 10 years of stop-and-startreforms and billions of dollars of international aid.

"An excessive reliance was placed on textbook economics," he told a conference last April as World Bank staffers squirmed in embarrassment. "Textbook economics may be good to teach American students, but it may not be so good as a basis for economic advice." The comments and similar statements led to a public dressing down for Stiglitz from Wolfensohn, who brought the Stanford University professor into the bank toward the middle of his own first five-year term.

Stiglitz, in a resignation letter to World Bank President James Wolfensohn, also expressed concern about falling research budgets, which is responsible for development and efforts to ease poverty around the world.

"I believe that at this particular stage, given what has already been accomplished, I can be most effective by expressing myself unfettered from the institutional responsibilities and commitments of the bank and the associated restraints," he said.

"The chief economist should be astrong and outspoken voice for the concerns of the developing world... The chief economist should present the developing countries not with a single pat set of recipes, but with a range of views, and the evidence and theories that lie behind those views," Stiglitz added in the letter, a copy of which was obtained by Reuters.