Designing Financial Systems in Transition Economies: Strategies for Reform in Central and Eastern Europe
AbstractThis collection examines the design of financial systems for central and eastern European countries engaged in the transition to market-based economies. It highlights the need for better approaches to measuring performance and providing incentives in banking and for financial mechanisms to encourage private-sector growth. Written by leading European and North American scholars, the essays apply modern finance theory and empirical data to the development of new financial sectors. Two broad themes emerge. The first is the critical relationship between reforms in the financial sector and in the real economy. Lending policies, which have a significant impact on business performance, need to discourage bad firm performance without prematurely liquidating potentially profitable enterprises. Conversely, the quality of firms influences the financial sector. If banks cannot find good credit risks, they cannot improve the quality of their portfolios. Until a critical mass of viable firms is built, equity markets will not develop sufficiently. The second theme is that the lack of fully developed markets and institutions may distort the policy outcomes predicted under models based on fully developed economies. Reliance on these models may therefore be inappropriate for transition economies.
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Bibliographic InfoThis book is provided by The MIT Press in its series MIT Press Books with number 0262133911 and published in 2002.
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Central Europe; Eastern Europe; transition economies;
Find related papers by JEL classification:
- P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
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- Gerald A. McDermott, 2004. "The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe," William Davidson Institute Working Papers Series wp726, William Davidson Institute at the University of Michigan.
- Richard Estes, 2007. "Development challenges and opportunities confronting economies in transition," Social Indicators Research, Springer, vol. 83(3), pages 375-411, September.
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