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Financial sector development in transition economies: Lessons from the first decade

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  • Bonin, John

    ()
    (BOFIT)

  • Wachtel, Paul

    (BOFIT)

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    Abstract

    The first decade of transition witnessed rapid and tumultuous financial sector development. Although, few transition economies have reached the point where institutions and markets fulfill all the functions of market based financial intermediation, progress has been much more rapid than had been anticipated. In many countries, active market-oriented financial institutions function where there was only a state planning mechanism a decade ago. Initial experiences showed that bank privatization programs often failed to achieve independence from government control and from undesirable weak clients. It is now widely accepted that the participation of foreign strategic investors in banking is an effective way of meeting these goals Capital market development is complicated by the need to support the development of institutional infrastructure and regulatory mechanisms while at the same time avoid interfering in the markets. In many instances policy makers expected immature markets and institutions to accomplish unattainable goals. Equity markets cannot be effectively support mass privatization programs. There are still many missing pieces in virtually all of the transition country capital markets.

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    Bibliographic Info

    Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 9/2002.

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    Length: 61 pages
    Date of creation: 04 Sep 2002
    Date of revision:
    Handle: RePEc:hhs:bofitp:2002_009

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    Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
    Phone: + 358 10 831 2268
    Fax: + 358 10 831 2294
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    Web page: http://www.suomenpankki.fi/bofit_en/
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    Keywords: capital markets; financial sector; privatization; transition economies;

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    1. Berglöf, Erik & Bolton, Patrick, 2003. "The Great Divide and Beyond - Financial Architecture in Transition," CEPR Discussion Papers 3476, C.E.P.R. Discussion Papers.
    2. Bratkowski, A. & Grosfeld, I. & Rostowski, J., 1998. "Investment and Finance in De Novo Private Firms: Empirical Results form the Czech Republic, Hungary and Poland," DELTA Working Papers 98-19, DELTA (Ecole normale supérieure).
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    6. Sharma, Krishnan, 2001. "The Underlying Constraints on Corporate Bond Market Development in Southeast Asia," World Development, Elsevier, vol. 29(8), pages 1405-1419, August.
    7. John P. Bonin & Yiping Huang, 2001. "Dealing with the Bad Loans of the Chinese Banks," William Davidson Institute Working Papers Series 357, William Davidson Institute at the University of Michigan.
    8. Nouriel Roubini & Paul Wachtel, 1998. "Current Account Sustainability in Transition Economies," NBER Working Papers 6468, National Bureau of Economic Research, Inc.
    9. John Bonin & Paul Wachtel, 1999. "Lessons from Bank Privatization in Central Europe," William Davidson Institute Working Papers Series 245, William Davidson Institute at the University of Michigan.
    10. Andrzej Bratkowski & Irena Grosfeld & Jacek Rostowski, 1999. "Investment and Finance in De Novo Private Firms: Empiracal Results from the Czech Republic, Hungary and Poland," William Davidson Institute Working Papers Series 236, William Davidson Institute at the University of Michigan.
    11. Richard J. Herring & Nathporn Chatusripitak, 2000. "The Case of the Missing Market: The Bond Market and Why It Matters for Financial Development," Center for Financial Institutions Working Papers 01-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
    12. Ryszard Kokoszczynski, 2001. "Structural changes in the Polish banking industry - three dimensions of consolidation processes in an emerging economy," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking industry in the emerging market economies: competition, consolidation and systemic stability, volume 4, pages 118-122 Bank for International Settlements.
    13. John P. Bonin & Yiping Huang, 2002. "Foreign Entry into Chinese Banking: Does WTO Membership Threaten Domestic Banks?," The World Economy, Wiley Blackwell, vol. 25(8), pages 1077-1093, 08.
    14. Robert B.K. Pye, 2000. "The Evolution of the Insurance Sector in Central and Eastern Europe and the Former Soviet Union," William Davidson Institute Working Papers Series 336, William Davidson Institute at the University of Michigan.
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    Cited by:
    1. Koen Schoors & Konstantin Sonin, 2005. "Passive Creditors," William Davidson Institute Working Papers Series wp737, William Davidson Institute at the University of Michigan.
    2. repec:spo:wpecon:info:hdl:2441/2976 is not listed on IDEAS
    3. Bhaumik, Sumon Kumar & Dang, Vinh & Kutan, Ali M., 2011. "Implications of bank ownership for the credit channel of monetary policy transmission: Evidence from India," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2418-2428, September.
    4. Kalina Dimitrova & Nikolay Nenovsky, 2003. "Assurance des dépôts bancaires durant l’accession à l’UE," Revue d'Économie Financière, Programme National Persée, vol. 72(3), pages 123-140.
    5. Matousek, Roman & Sarantis, Nicholas, 2009. "The bank lending channel and monetary transmission in Central and Eastern European countries," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 321-334, June.
    6. Fungacova, Zuzana & Hanousek, Jan, 2006. "A castle built on sand: The effects of mass privatization on stock market creation in transition economies," BOFIT Discussion Papers 14/2006, Bank of Finland, Institute for Economies in Transition.
    7. Jérôme Creel* & Sandrine Levasseur, 2007. "Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area?," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 30-59, February.
    8. Jérôme Creel & Sandrine Levasseur, 2006. "Canaux de transmission de la politique monétaire dans l'ue. Le cas de trois nouveaux entrants," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 881-898.
    9. Nikolay Nenovsky & Kalina Dimitrova, 2003. "Deposit Insurance During EU Accession," William Davidson Institute Working Papers Series 2003-617, William Davidson Institute at the University of Michigan.
    10. Gérard Duchêne & Ramona Jimborean & Boris Najman, 2006. "Structure of Monetary Assets in Transition Economies: Financial Innovation and Structural Transformation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00270544, HAL.
    11. Hall, Thomas W., 2012. "The collateral channel: Evidence on leverage and asset tangibility," Journal of Corporate Finance, Elsevier, vol. 18(3), pages 570-583.

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