Finance, economic development and the transition: the East German case
The role of banks in the transition concerns three issues: the bad loans problem, the role of banks in providing a solution to the problems of corporate governance of privatized enterprises and the access of new enterprises to finance for investment. This paper shows how the combination of early privatization of the banking system plus financial restructuring of enterprises by the Treuhand prevented the development of a 'bad loans' problem in East Germany. The merits of banks as large stakeholders in privatized enterprises has been frequently debated in Eastern Europe. Although the role of banks as owners of non-financial companies in West Germany is frequently exaggerated, there was a widespread public expectation that they would play a considerable role in the restructuring of East German enterprises. We show that their role in acquiring stakes in privatized firms in East Germany has been negligible and suggest reasons for this outcome. East Germany is characterized by a very high level of investment and the second part of the paper investigates how the financial system can affect the relationship between investment and growth. It has been argued that the inefficiencies of both development and commercial banking in the Italian Mezzogiorno have contributed to the failure there of high levels of investment to translate into growth. The efficiency characteristics of development and commercial banking in Southern Italy are contrasted with those in East Germany. Considerable attention is given to the extent of competition in commercial banking and to the delegation by the development banks of screening and monitoring activities to the commercial banks, which characterizes the German system. It is argued that the German banking system which has been transferred to East Germany does not suffer from the inefficiencies found in Italy. Evidence is provided for the convergence of the structure of banking in East and West Germany. Nevertheless, in spite of the extensive acces
(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): 3 (1995)
Issue (Month): 2 (06)
|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|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carlin, Wendy & Mayer, Colin, 1992. "Restructuring Enterprises in Eastern Europe," CEPR Discussion Papers 700, C.E.P.R. Discussion Papers.
- Alexander, Ian & Mayer, Colin, 1990. "Banks and Securities Markets: Corporate Financing in Germany and the UK," CEPR Discussion Papers 433, C.E.P.R. Discussion Papers.
- Aghion, Philippe & Blanchard, Olivier J & Carlin, Wendy, 1994. "The Economics of Enterprise Restructuring in Central and Eastern Europe," CEPR Discussion Papers 1058, C.E.P.R. Discussion Papers.
- Faini, Riccardo & Giannini, Curzio & Ingrosso, Fulvio, 1992.
"Finance and Development: The Case of Southern Italy,"
CEPR Discussion Papers
674, C.E.P.R. Discussion Papers.
- Faini, R. & Galli, G. & Giannini, C., 1992. "Finance and Development : the Case of Southern Italy," Papers 170, Banca Italia - Servizio di Studi.
- Corbett, Jennifer & Mayer, Colin, 1991.
"Financial Reform in Eastern Europe: Progress With the Wrong Model,"
CEPR Discussion Papers
603, C.E.P.R. Discussion Papers.
- Corbett, Jenny & Mayer, Colin, 1991. "Financial Reform in Eastern Europe: Progress with the Wrong Model," Oxford Review of Economic Policy, Oxford University Press, vol. 7(4), pages 57-75, Winter.
When requesting a correction, please mention this item's handle: RePEc:bla:etrans:v:3:y:1995:i:2:p:169-195. 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.