Enterprise debt and economic transformation (Financial restructuring of the state sector in Central and Eastern Europe)
Throughout Central and Eastern Europe (CEE), there is a widespread failure of enterprise debtors to make scheduled payments of principal and interest to creditors, who in turn have strong incentives not to declare bankruptcy. In such circumstances, the price mechanism does not properly guide the reallocation of resources. The normal process of exit in a market economy is suspended, and the disproportionate share of bank credit effectively going to refinancing of incumbents impedes entry. We argue that this may be the single most important obstacle to economic restructuring in CEE. We discuss the scope of and reasons for this problem; the inefficiencies it creates; and how to deal with it. We propose a sequencing of recapitalization of banks and of enterprises that is designed to be credible and robust to the incentive failures identified. We then assess the fiscal consequences of such a reform package and how it affects the conduct and effectiveness of monetary policy. We conclude that the international institutions must put the full weight of their authority and credibility behind such a package in order to break through the obstacles to successful restructuring.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 1 (1993)
Issue (Month): 1 (01)
|Contact details of provider:|| Postal: One Exchange Square, London EC2A 2JN|
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0967-0750
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0967-0750|
When requesting a correction, please mention this item's handle: RePEc:bla:etrans:v:1:y:1993:i:1:p:116-117. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.