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


  • Gerald A. McDermott



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.

Suggested Citation

  • Gerald A. McDermott, 2004. "The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe," William Davidson Institute Working Papers Series wp726, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2004-726

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    References listed on IDEAS

    1. International Monetary Fund, 2001. "Republic of Poland; Financial System Stability Assessment," IMF Staff Country Reports 01/67, International Monetary Fund.
    2. 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.
    3. Reuven Glick & Ramon Moreno & Mark M. Spiegel, 2001. "Financial crises in emerging markets," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue mar.23.
    4. Barth, James R.*Caprio,Gerard*Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
    5. Edda Zoli, 2001. "Cost and Effectiveness of Banking Sector Restructuring in Transition Economies," IMF Working Papers 01/157, International Monetary Fund.
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    7. Anna Meyendorff & Anjan V. Thakor (ed.), 2002. "Designing Financial Systems in Transition Economies: Strategies for Reform in Central and Eastern Europe," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262133911, January.
    8. 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.
    9. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
    10. Marc G Quintyn & David S. Hoelscher, 2003. "Managing Systemic Banking Crises," IMF Occasional Papers 224, International Monetary Fund.
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    13. 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.
    14. Anderson, Ronald W. & Kegels, Chantal, 1998. "Transition Banking: Financial Development of Central and Eastern Europe," OUP Catalogue, Oxford University Press, number 9780198290131.
    15. 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.
    16. 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.
    17. 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.
    18. Helper, Susan & MacDuffie, John Paul & Sabel, Charles, 2000. "Pragmatic Collaborations: Advancing Knowledge While Controlling Opportunism," Industrial and Corporate Change, Oxford University Press, vol. 9(3), pages 443-487, September.
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    More about this item


    Institutional change; transition economies; bank crises; bank supervision; learn;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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