This study analyses bank lending in the larger context of bank-firm relations within the Bulgarian specificity of currency board. It focuses on the ‘intersection’ of credit supply and demand on the side of banks and firms simultaneously. We suggest both traditional and new hypotheses corresponding to the specific conditions of the Bulgarian ownership change, transitional corruption and other institutional and political factors. The model is based on a survey on Bulgarian banks and a unique database on firms. The study found that the dynamics and structure of credit is affected mainly by the features of the institutional environment, whereas the ‘resource’ and traditional factors became secondary. During the period 1998 – 2001, there is separation of the banking sector activity from the activity of the real sector in Bulgaria. In the new conditions of currency board, the dual sector of enterprises and the specific institutional environment continue their existence. Despite its disciplining effect the currency board by itself is not sufficiently effective to overcome the remaining ‘institutional obstacles, associated mainly with the inefficiency of the judicial system, corruption, state capture, uncertain property rights, etc.
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Length: 27 pages Date of creation: 01 Apr 2003 Date of revision: Handle: RePEc:wdi:papers:2003-555
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Find related papers by JEL classification: E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit G2 - Financial Economics - - Financial Institutions and Services L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance P2 - Economic Systems - - Socialist Systems and Transition Economies
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