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The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)

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    This article focuses the attention on the analysis of the banking dynamics and the impact on the development of the real sector due to the dominant role of the banking system in the financial sector. The main objective is to derive and argue the theoretical and methodological approach in the study of the interrelations between the banking system and the real economy in a single country and on this basis to study the interdependence and the causal relation between the dynamics of the banking sector and the real sector in Bulgaria in the long and short run, in order to distinguish the basic transmission mechanisms between them and to make a general assessment of the state of the financial system both for the entire transition period, as well as within the two specific periods before and after the introduction of the Currency Board. The first part presents an explanation of the theory and methodology of this analysis. The specific results from the recent empirical analysis of the banking system and the real economy in Bulgaria shall be outlined in the second article.

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    Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Thought.

    Volume (Year): (2009)
    Issue (Month): 7 ()
    Pages: 38-66

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    Handle: RePEc:bas:econth:y:2009:i:7:p:38-66
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