Financial Sector Development in Transition Economies: Lessons from the First Decade

61 Pages Posted: 20 Sep 2007

See all articles by John Bonin

John Bonin

Wesleyan University - Economics Department

Paul Wachtel

New York University - Stern School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 10, 2002

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

Suggested Citation

Bonin, John P. and Wachtel, Paul, Financial Sector Development in Transition Economies: Lessons from the First Decade (October 10, 2002). Available at SSRN: https://ssrn.com/abstract=1015704 or http://dx.doi.org/10.2139/ssrn.1015704

John P. Bonin (Contact Author)

Wesleyan University - Economics Department ( email )

Middletown, CT 06459
United States
203-685-2000 (Phone)

Paul Wachtel

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~pwachtel

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