Financial systems in Eastern Europe: lessons from the West

Abstract

This is a summary of an article to be published by the World Bank. The article has thre purposes. The first is to evaluate what western financial systems tell us about the comparative merits of different financial systems. The second is to examine evidence on the process by which different types of financial structures can be established. The third is to draw inferences about the appropriate structure of financial systems for Eastern Europe and the process by which such systems should be created. It summarizes work that has been done as part of several projects to draw inferences for the design of financial systems in Eastern Europe.

This is a summary of a paper that was presented at the SUERF Conference in Berlin, 8–10 October 1992. The full paper is to be published by the World Bank under the title “In the Image of the West: Creating Financial Systems in Eastern Europe” in a volume on Financial Reform in Eastern Europe. I am grateful to Alfredo Thorne for having suggested the project.

The paper has benefited from comments from participants at a seminar at the World Bank, in particular from Manuel Hinds and Millard Long, as well as participants in the SUERF conference. The paper is part of a Centre for Economic Policy Research International Study on the Financing of Industry. I am grateful to Ian Alexander, Elisabetta Bertero, Jenny Corbett, Jeremy Edwards and Tim Jenkinson for helpful suggestions. The paper discusses research undertaken with Julian Franks on an ESRC project entitled “Capital Markets. Corporate Governance and the Market for Corporate Control”, no. W102251003. Finally, the paper draws on work done with Wendy Carlin on enterprise restructuring in Eastern Europe. This research was supported by the Centre for Economic Pohcy Research under its programme on Eastern Europe.