BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 9/2002:
Financial sector development in transition economies: Lessons from the first decade
John Bonin ()
and Paul Wachtel
Abstract: The first decade of transition witnessed rapid and
tumultuous financial sector development. Although, few transition economies
have reached the point where institutions and markets fulfill all the
functions of market based financial intermediation, progress has been much
more rapid than had been anticipated. In many countries, active
market-oriented financial institutions function where there was only a
state planning mechanism a decade ago. Initial experiences showed that bank
privatization programs often failed to achieve independence from government
control and from undesirable weak clients. It is now widely accepted that
the participation of foreign strategic investors in banking is an effective
way of meeting these goals Capital market development is complicated by the
need to support the development of institutional infrastructure and
regulatory mechanisms while at the same time avoid interfering in the
markets. In many instances policy makers expected immature markets and
institutions to accomplish unattainable goals. Equity markets cannot be
effectively support mass privatization programs. There are still many
missing pieces in virtually all of the transition country capital
markets.
Keywords: capital markets; financial sector; privatization; transition economies; (follow links to similar papers)
61 pages, September 4, 2002
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