The Order of Financial Liberalization
This chapter begins with an overview of the functions of financial intermediation and possible sources of inefficiency in the context of economic transition. We refer to the optimum order of financial liberalization, discussed by McKinnon (1993). We next move to an empirical analysis. First, we test how the transition economies in general, and the two main regions within this group (CIS and non-CIS), differ from other comparator economies along basic financial dimensions. Second, we test how the reforms implemented in the transition countries affected the characteristics of their financial systems, distinguishing between immediate effects and those that came with a time lag. We then draw some brief conclusions.
KeywordsEurope Shrinkage Autocorrelation Romania
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