No. 33, 1995 - The Financial Sector in Central and Eastern Europe: Three Questions and Three Answers

This paper wants to arrive at a strategy for the development of the financial sector in the countries of Central and Eastern Europe. In order to have a clear idea of the significance of this, the paper’s first question will be: Why should the financial sector develop? With financial (sector) development is meant a balanced growth of financial institutions and markets, their balance sheet totals and turnovers, the availability of financial instruments and services and also the development of the financial sector’s institutional and legislative framework. The next section will formulate the financial sector’s function in the economy. A conclusion is drawn with respect to the importance of financial sector development in a policy aimed at economic development.
One can recognise the importance of financial development, the way in which this is to be achieved is still an open question. The third section will analyse how the financial sector can best develop. It will introduce the concept of financial liberalisation as a way to develop the financial sector. Then this argument is confronted with different analysis, research and criticism. A conclusion is drawn with respect to financial liberalisation in a policy aimed at by financial development.
The final section will end up with a strategy for the policy in the countries of Central and Eastern Europe. It will answer the question of how to apply a policy aimed at financial development in the countries of this region. To come to a policy for one of the particular countries would require specific research. This paper presents the common characteristics and the possible differences of what in the author’s view should be transformed to specific policies for these countries.

The paper is available here.