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The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe

  • Gerald A. McDermott

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    This article examines the political conditions shaping the creation of new institutional capabilities. It analyzes bank sector reforms in the 1990s in three leading postcommunist democracies – Hungary, Poland, and the Czech Republic. It shows how different political approaches to economic transformation can facilitate or hinder the ability of relevant public and private actors to experiment and learn their new roles. With its emphasis on insulating power and rapidly implementing self-enforcing economic incentives, the “depoliticization” approach creates few changes in bank behavior and, indeed impedes investment in new capabilities at the bank and supervisory levels. The “deliberative restructuring” approach fostered innovative, costeffective monitoring structures for recapitalization, a strong supervisory system, and a stable, expanding banking sector.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp726.pdf
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    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp726.

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    Length: pages
    Date of creation: 01 Nov 2004
    Date of revision:
    Handle: RePEc:wdi:papers:2004-726
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    1. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
    2. M. Belka & A. Krajewska, 1997. "The Polish Bank and Enterprise Restructuring Programme: Debt / Equity Swaps. Survey Results," CERT Discussion Papers 9714, Centre for Economic Reform and Transformation, Heriot Watt University.
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    4. International Monetary Fund, 2001. "Republic of Poland; Financial System Stability Assessment," IMF Staff Country Reports 01/67, International Monetary Fund.
    5. Tang, Helena & Zoli, Edda & Klytchnikova, Irina, 2000. "Banking crises in transition economies : fiscal costs and related issues," Policy Research Working Paper Series 2484, The World Bank.
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    14. Witold J. Henisz & Bennet A. Zelner, 2003. "Legitimacy, Interest Group Pressures and Change in Emergent Institutions: The Case of Foreign Investors and Host Country Governments," William Davidson Institute Working Papers Series 2003-589, William Davidson Institute at the University of Michigan.
    15. Edda Zoli, 2001. "Cost and Effectiveness of Banking Sector Restructuring in Transition Economies," IMF Working Papers 01/157, International Monetary Fund.
    16. John P. Bonin & Bozena Leven, 2000. "Can Banks Promote Enterprise Restructuring?: Evidence From a Polish Bank's Experience," William Davidson Institute Working Papers Series 294, William Davidson Institute at the University of Michigan.
    17. Haggard, Stephan & Maxfield, Sylvia, 1996. "The political economy of financial internationalization in the developing world," International Organization, Cambridge University Press, vol. 50(01), pages 35-68, December.
    18. Janet Mitchell, 1998. "Bankruptcy Experience in Hungary and the Czech Republic," William Davidson Institute Working Papers Series 211, William Davidson Institute at the University of Michigan.
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